Spot Ether (ETH) exchange-traded funds (ETFs) are expected to have a slower start compared to spot Bitcoin ETFs due to the challenges in valuing the diverse use cases of Ethereum, according to an industry executive. The spot Bitcoin ETFs received $655.2 million in inflows on their opening day of trading, surpassing expectations. Stephen Richardson, managing director of financial markets at Fireblocks, explained that while Bitcoin offers a clear use case as a store of value, the metrics for valuing Ethereum’s technology-driven investment use cases are less defined. Richardson emphasized the need for appropriate value metrics and drivers to accurately assess the adoption and utilization of Ethereum’s technology. Therefore, it is unlikely that Ether ETFs will experience the same level of initial inflows as Bitcoin ETFs.
Data from BitMEX Research shows that Bitwise’s BITB product received the highest inflows of $237.9 million on the first day of spot Bitcoin ETF trading, followed by Fidelity’s FBTC ($227 million) and BlackRock’s IBIT ($111.7 million).
To evaluate Ether, Richardson suggested looking at the metric of total value locked, which is already used to value Ethereum and layer-2 blockchains. However, he expressed the need for additional metrics to provide a comprehensive assessment. VanEck, one of the approved spot Ether ETF applicants, suggested that transaction volume, number of users, and validators could be used to evaluate Ethereum’s adoption and utilization.
When asked about the key selling point for potential investors in spot Ether ETFs, Richardson highlighted Ethereum’s potential to dominate the digital native space and connect retail and institutional investors on-chain.
Markus Thielen, head of research at 10x Research, described Ethereum as a network empowering the future of finance. However, he pointed out that Ethereum’s revenue is currently small compared to its market capitalization, which affects its investment viability. Thielen also noted that Ethereum’s staking yields are lower than United States Treasury yields.
On May 23, the U.S. Securities and Exchange Commission approved applications from several companies, including VanEck, BlackRock, and Fidelity, to issue spot Ether ETFs. However, the ETFs can only start trading once the SEC approves their Form S-1 filings.
Bloomberg ETF analysts Eric Balchunas and James Seyffart expect the spot Ether ETFs to capture between 10% and 20% of the flows that spot Bitcoin ETFs have seen.
According to Farside Investors, spot Bitcoin ETFs have attracted $13.8 billion in net inflows since their launch approximately four and a half months ago. Even capturing 15% of that would result in spot Ether ETFs accumulating a combined $2.07 billion, which is still impressive within the industry.
The battle between the SEC and the crypto industry regarding the approval of spot Ether ETFs has been compared to the clash between Godzilla and Kong, highlighting the legal challenges faced by the SEC.