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June 28, 2024 by Mishal Ali
The U.S. Securities and Exchange Commission is reportedly on the verge of approving spot Ethereum exchange-traded funds as early as July 4th. Industry insiders say discussions between the prominent asset managers and regulators have reached the final stages. Eight companies are now in front of the line seeking SEC approval, such as BlackRock, VanEck, Franklin Templeton, and Grayscale Investments.
Sources close to the discussions, who spoke on condition of anonymity due to the sensitive nature of ongoing negotiations, disclosed that the process of amending necessary offering documents is nearing completion, with only minor issues remaining unresolved. According to a lawyer familiar with one of the issuers, approval for these ETFs could materialize within “a week or two.”
Bitwise CIO Predicts $15B Inflows for Ethereum ETPs
Matt Hougan, chief investment officer of Bitwise, had a bold call, estimating that Ethereum-linked ETPs might see as much as $15 billion in net inflows within the first 18 months after launch. Hougan’s estimate is based on relative market size and prior investment patterns in the cryptocurrency space, pointing to the potential for significant interest from investors.
1/ Ethereum ETPs will attract $15 billion in net flows in their first 18 months on the market.
A thread on how I get to this estimate.
— Matt Hougan (@Matt_Hougan) June 26, 2024
Comparing existing markets in Europe and Canada, where crypto ETPs have started to gain traction, Hougan said Ethereum’s market share tends to track its global market capitalization quite closely, suggesting a relatively balanced approach on the investor demand side. He pointed to one of the critical differences in investor behavior between Bitcoin and Ethereum products, subtly hinting that Ethereum’s slightly lower adoption rate in such markets might also be part of initial investor preference.
However, one major factor tempering the estimates by Hougan is the lack of a juicy carry trade setup that has propped up Bitcoin ETF investments. Unlike Bitcoin, meaningful institutional interest has been seen in using futures contracts on it to make a possible bet; the Ethereum ecosystem presents different problems for such speculative trading activities.
10/ There is one other major factor to consider: the carry trade. A lot of US BTC ETF AUM — perhaps as much as $10 billion — is tied up in the carry trade, whereby institutional investors buy the ETF and they sell BTC futures contracts against it on the CME.
— Matt Hougan (@Matt_Hougan) June 26, 2024
If launched, this would decentralize investment portfolios and increase the pace of mainstream use of Ethereum as a viable asset class within traditional financial markets. Lofty predictions have been made for how the broadened access to the crypto market in the United States will look once the looming approval of Ether-linked ETFs finally comes into existence, set against a backdrop of growing anticipation and with institutional players on board ready to reap the rewards of this breakthrough in regulation.
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