Why Ethereum ETF Day One Income Won’t Be Like Bitcoin — Fireblocks MD
Spot Ether (ETH) exchange-traded funds, like Bitcoin ETFs, are not seen as a day-one income because the asset's use cases are more difficult to find value for, an industry executive warns.
The spot Bitcoin ETFs saw $655.2 million in revenue in the opening trading day on January 11, which was above industry expectations at the time.
While Bitcoin presents a fixed-price use case, the metrics used to estimate Ethereum's tech-enabled investment use cases are less clear, FireBlocks Financial Markets Managing Director Stephen Richardson told Cointelegraph.
“What's missing is a broad consensus that accurately assesses the scale of utility or use of the Ethereum blockchain.”
“The right value metrics and drivers need to be created first to assess the adoption or use of the technology and then to find the value,” Richardson added.
As a result, he concluded, “we're not going to see the same amount of revenue per day with the Ether ETF as we've seen with the Bitcoin ETF.”
Bitwise's BITB product saw the highest volume of revenue on the first day of Bitcoin ETFs at $237.9 million, followed by Fidelity's FBTC ($227 million) and BlackRock's IBIT ($111.7 million), BitMEX research data shows.
When discussing how one might evaluate Ethereum, Richardson suggested looking at total value locked, a measure that Ethereum and the Layer 2 blockchain can already use on top of it. However, Richardson hinted that he would like to see more.
VanEek, one of the recently approved Ether ETF indicators, recently pointed to the transaction volume, number of users and validators to evaluate the adoption and usage of Ethereum.
When asked what the strongest one-liner was to convince potential investors of the Ether ETF, Richardson said that Ethereum is the “best choice” to dominate the digital native space and attract more retail and institutional investors to the chain.
“The value of Ethereum is tied to the use cases that are being built on top of it, so investors are betting on the use of the software itself.”
Last week, Marcus Thielen, head of 10x Research, suggested that Ethereum could be positioned as “the network that will power the future of finance.”
However, the revenue that Thielen Ethereum is generating is “tiny” relative to its $455 billion market cap, which doesn't mean it's a “viable, cash-flow-generating investment.”
Ethereum's high yield is lower than U.S. Treasury yields, Thielen added.
Related: SEC's ETF Ruling Means ETH and ‘Many' Other Tokens Are Not Securities
On May 23, the SEC approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Bitwise, Franklin Templeton, ARK 21Shares and Invesco Galaxy to issue Ether ETFs.
Those authorized to begin trading for ETFs must wait for the SEC to sign off on their Form S-1 application.
If that happens, Bloomberg ETF analysts Eric Balchunas and James Seifert expect the Bitcoin ETF to capture somewhere between 10-20% of the flows seen.
According to Farside Investors, spot bitcoin ETFs have raised $13.8 billion in net income since the products launched nearly four and a half months ago.
Holding 15% of that would still see the spot Ether ETFs at $2.07 billion at the same time, which is still impressive by industry standards.
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