Ether Spot ETFs Could See Lower Demand Compared to Bitcoin Peers: Bernstein

06/25/2024 19:18

Ether and other digital assets need a better regulatory regime and the narrative is expected to improve around the U.S. elections later this year, the report said.

Ether spot ETFs are expected to see less demand than bitcoin versions, the report said.
The lack of a staking feature in ether ETFs means less spot conversion, the report said.
Bernstein said that despite the recent pullback in crypto markets institutional adoption continues to grow.

Ether {{ETH}} spot exchange-traded funds (ETFs), once approved for trading, will likely see the same sources of demand as the bitcoin {{BTC}} ETF but on a lower scale, broker Bernstein said in a research report on Monday.

“ETH should not see as much spot ETH conversion due to the lack of an ETH staking feature in the ETF,” analysts Gautam Chhugani and Mahika Sapra wrote, adding that the basis trade will likely find takers over time and this should contribute to healthy liquidity in the ETF market. The basis trade involves buying the spot ETF and selling the futures contract at the same time and then waiting for the prices to converge.

Spot ether ETFs are close to becoming available to investors in the U.S. after the Securities and Exchange Commission (SEC) approved key regulatory filings from issuers last month.

“ETH as a primary tokenization platform is building up a strong use-case, both for stablecoin payments, as well as tokenization of traditional assets and funds,” the authors wrote.

Ether and other digital assets need a “more improved regulatory regime” and Bernstein expects the narrative to improve around the U.S. elections later in the year as the odds of a Republican victory continue to improve and because Trump is now pro-crypto.

"Despite the recent pullback in crypto markets the “structural adoption cycle remains intact,” the report added.

Wall Street giant JPMorgan said that spot ether ETFs are likely to see much lower demand than the bitcoin ETFs, noting that the world’s largest cryptocurrency had the first mover advantage and could potentially saturate overall demand for crypto exchange-traded funds, it said in a report last month.