Ethereum ETFs – 3 steps that can hack Wall Street
Ethereum, the world's second-largest blockchain network, is expected to be the next focus of crypto exchange-traded funds, but volume may be problematic.
While Ethereum has previously been described as the “internet of money”, “world computer” and “digital oil” – some worry that Ethereum does not have an elevator pitch, but its high technical roadmap may prove difficult for Wall. Holding street and spot Ether (ETH) ETFs may reduce demand.
Markus Thielen, head of research at 10x Research, told Cointelegraph that the best investors should avoid technical jargon. Here Thielen and many analysts believe that it is possible to install Ethereum.
Financial future
Ethereum as “the network that powers the future of finance” is easy for Wall Street investors to understand, Thielen said.
Ethereum is already home to almost all of the world's largest decentralized financial protocols, real-world assets, and stablecoins.
However, Thielen said that Ethereum has lost many users and recent network updates have come slowly, which may affect this narrative.
“Ethereum's low yield relative to market capitalization does not make it a viable, cash-flow-generating investment, even if it has lower yields than Treasuries.”
All-in-one decentralized
Alternatively, Ethereum could become a “decentralized platform for all kinds of services” that could help with everything from finance and social networks to AI, said Henrik Andersson, chief investment officer at investment management firm Apollo Crypto.
Apart from decentralized financial applications, the Ethereum ecosystem includes decentralized autonomous organizations, social networks, and identity solutions.
Bitcoin is growing fast
Anderson suggests that a simpler pitch is that Ether is a more inverted kriptovalyutnogo compared to Bitcoin.
“Others may see Ethereum as a small and fast-growing crypto asset,” he said.
Ether's market cap currently sits at $453 billion, nearly triple Bitcoin's $1.34 trillion market cap.
Anderson said others were drawn to Ether's potential value and insisted that Wall Street investors were not impressed by Ethereum's complex six-step technical roadmap.
Technically or not, the price of Ether relative to Bitcoin (BTC) has steadily decreased from 0.085 in December 2021 to 0.055.
That makes it difficult to convince investors to buy Ether ETFs with similar Bitcoin investment products already on the market, said CK Zheng, chief investment officer at cryptocurrency hedge fund ZX Squared Capital.
The Ethereum Foundation, which is being investigated by the Securities and Exchange Commission, and the emergence of Solana as an Ethereum competitor are two other tailwinds that could hamper the performance of the space's Ethereum ETFs, Zeng noted.
Larry Fink believes in it, so you should too
That said, some of Wall Street's biggest names have begun exploring Ethereum's use cases with considerable success.
BlackRock – one of the authorized space ether ETF issuers – used Ethereum in March to launch the BlackRock Dollar Institutional Digital Liquidity Fund, which has accumulated $470 million in assets.
According to BlackRock CEO Larry Fink, every stock and bond will eventually be indexed on the blockchain. If Fink's prediction comes true, according to analysts at 21Shares, Ethereum could benefit as it accounts for 71.9% of all financial assets on the chain.
Related: SEC's ETF Ruling Means ETH and ‘Many' Other Tokens Are Not Securities
The SEC approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy and Bitwise to issue Ether ETFs on May 23.
Those approved must wait until the SEC greenlights a Form S-1 for ETFs to begin trading.
If that happens, Bloomberg ETF analyst James Seifert expects ETFs to absorb 20% of the flows seen by the Bitcoin ETF, while Balchunas puts a lower estimate in the 10% to 15% range.
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