BlackRock's spot Ethereum ETF begins pre-market trading amid muted demand predictions

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BlackRock’s Spot Ethereum ETF has commenced pre-market trading early Tuesday, following the SEC’s approval for multiple spot Ethereum ETFs.

This development allows mainstream investors to directly invest in Ethereum without managing the digital asset themselves, although functionality for staking and other stake-based derivatives have been removed prior to the approval.

In an advertisement video for its Ethereum ETF, BlackRock’s US Head of Thematic and Active ETFs Jay Jacobs said:

“While many see Bitcoin’s key appeal in its scarcity many find Ethereum’s appeal in its utility […] you could think of Ethereum as a global platform for applications that run without centralized intermediaries.”

Here's BlackRock's Ether pitch to normies via @JayJacobsCFA: "While many see bitcoin's key appeal in its scarcity many find ethereum's appeal in its utility.. you could think of ethereum as a global platform for applications that run without decentralized intermediaries" $ETHA pic.twitter.com/ffyglfSTiB

— Eric Balchunas (@EricBalchunas) July 22, 2024

The SEC’s approval for major asset management firms including Fidelity, Grayscale and Franklin Templeton, represents a major milestone for Ethereum and the broader crypto market. Trading of these ETFs is scheduled to start today at 9:30 AM EDT. At the time of writing, Ethereum’s price stands at approximately $3,525, up 1% over the past 24 hours, according to data from CoinGecko.

While some analysts predict these ETFs could see inflows of up to $5.4 billion in the first six months, algorithmic trading firm Wintermute offers a more conservative outlook. The firm forecasts lower-than-anticipated demand, projecting inflows closer to $3.2 to $4 billion. Wintermute expects Ethereum ETFs to see 15% to 20% of the flow observed for Bitcoin ETFs, potentially leading to an 18% to 24% price increase for ETH.

Two factors for ‘muted demand’ on Ethereum ETFs

Wintermute attributes its less optimistic forecast to two key factors.

Primarily, the absence of a staking mechanism within the ETFs may diminish Ethereum’s appeal as an investment vehicle. Staking, a core component of Ethereum’s security model since its shift to proof-of-stake in 2022, allows users to earn rewards by delegating tokens to the network.

The inability to stake Ethereum within these ETFs could make them less attractive to yield-seeking investors. Crypto Briefing’s previous coverages on this matter explain the nuances in detail.

Wintermute also cites the lack of a shared narrative to attract investors as a potential hurdle for Ether ETFs. Unlike Bitcoin, which has successfully tapped into the “digital gold” narrative, Ethereum’s more complex ecosystem and diverse applications may make it challenging to present a unified investment thesis to potential ETF buyers.

Despite these challenges, Ethereum’s dual functionality as both a digital currency and a platform for decentralized applications and smart contracts may appeal to investors interested in technological innovations and diverse blockchain applications, Wintermute claims. The launch of Ethereum ETFs represents a significant step in making crypto investments more accessible to mainstream investors, potentially impacting both the crypto market and the broader financial landscape.

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