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Ether Spot ETFs Could See $5B of Net Inflows in the First Five Months: Galaxy

Jun 26, 2024
  • Galaxy said spot ether ETFs could see $5 billion of net inflows in the first five months.
  • Demand for the new products is expected to come from independent investment advisors and broker/dealer platforms.
  • The lack of staking rewards could limit demand for these spot ETFs, the report said.
As an experienced financial analyst, I believe that Galaxy Research’s prediction of $1 billion in net inflows per month for Ether (ETH) spot exchange-traded funds (ETFs) could be a significant development for the cryptocurrency market. The anticipated demand comes from independent investment advisors and broker/dealer platforms, which is a positive sign for the institutional adoption of ETH.According to a report published by Galaxy Research on Wednesday, there is potential for Ether (ETH) exchange-traded funds (ETFs) to attract approximately $1 billion in new investments each month once they become available for trading.

As an analyst, I project that the investments flowing into Ethereum-based Exchange Traded Funds (ETFs) will account for between one fifth and one half of the total investments entering Bitcoin ETFs during the initial five-month period. My forecast sets this figure at 30%, which translates to approximately $1 billion in net inflows each month.

Ether exchange-traded funds (ETFs) are on the brink of being made available for purchase in the United States, following the SEC’s approval of applications last month. However, before these products can be traded, their S-1 filings also need to receive the green light from the regulatory body. The launch of spot bitcoin ETFs occurred back in January within the U.S. markets.

Just like with Bitcoin (BTC) ETFs, there is anticipated interest in Ether (ETH) ETFs from financial advisors and brokerage firms, according to the report.

Ether’s price reaction to Exchange-Traded Fund (ETF) inflows will be more pronounced than bitcoin’s because a larger proportion of ethereum’s total supply is currently tied up in staking, bridges, and smart contracts, leaving less on centralized exchanges where most ETF buying and selling occurs. (Galaxy Digital’s analysis)

Galaxy cautioned that spot ether ETF demand may be limited due to the lack of staking rewards.

As an analyst, I would rephrase the given statement as follows: The outflows from the Grayscale Ethereum Trust (ETHE) are projected to negatively impact ether ETF inflows by approximately 319,000 ETH per month or equivalent to $1.1 billion. However, since a smaller percentage of ether is held in these trusts compared to the Grayscale Bitcoin Trust (GBTC), the conversion of ETHE into ETH will have a relatively lesser impact on the price of Ethereum compared to the GBTC conversion.
As an analyst, I’ve observed a notable difference between Grayscale Bitcoin Trust (GBTC) and Ethereum Trust (ETHE). While GBTC may be impacted by forced selling due to bankruptcy situations involving key players such as 3AC and Genesis, ETHE has not faced similar pressures. This observation implies that ether could experience less selling pressure linked to Grayscale trusts compared to bitcoin.

The SEC could approve spot ether ETFs as soon as July 4, according to a Reuters report on Thursday.

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2024-06-27 13:10