While interest in ETH ETFs could be buoyed by the ongoing shift toward tokenization, market watchers aren't expecting these funds to be anywhere near as popular as those tracking Bitcoin's spot price.
After a protracted and messy battle with the U.S. Securities and Exchange Commission (and no shortage of rejected applications and delayed decisions,) exchange-traded funds based on Ether's spot price could finally hit the market soon, giving investors another option besides Bitcoin.
Right now, issuers and regulators are in a back and forth as they work together on S-1 forms, ironing out details that include fees and expense ratios. It's unclear whether this will take days or weeks, leaving the crypto markets on tenterhooks as to when they'll gain approval.
This would be a significant development for the world's second-largest cryptocurrency, not least because it would allow investors on Wall Street to gain exposure to its price movements without owning the asset directly.
But the bigger question is whether the approval of ETH ETFs has already been priced in... and how much demand there's going to be for these products. Bitcoin benefits from brand recognition and a high degree of public awareness, but the same can't really be said for Ether.
Bitcoin accelerated to a new all-time high just two months after the likes of BlackRock and Fidelity started offering BTC ETFs back in January—commanding billions of dollars in inflows. At the time of writing, ETH remains 35% below a record price of $4,891 that was recorded in November 2021, indicating there could be room to run if history repeats itself.
Matthew Hougan from Bitwise Asset Management believes it may take a few years for ETH ETFs to gain momentum, but could quickly gain appeal as attention turns to the tokenization of assets, with Standard Chartered recently predicting that this will be a $30 trillion market in just 10 years' time. He told CNBC:
"If we get five or 10 or 15 billion dollars in the first two years of these Ethereum ETFs, that is a massive runaway success."
By comparison, data from SoSo Value indicates that the total net assets within Bitcoin ETFs has accelerated to $50.62 billion in just six months—the equivalent to 4.47% of BTC's market capitalization.
Grayscale Investments anticipates that ETH ETFs may only see 25% to 30% of the demand enjoyed by their BTC counterparts.
Kraken's head of strategy Thomas Perfumo went on to tell Reuters that it might actually be easier for ETH to achieve a new all-time high, explaining:
"Consider the fact that Ether has roughly half the level of spot liquidity. Half the amount of liquidity means that you need less amount of absolute dollars coming into the market to make the same price impact on Ether."
And given about 33 million ETH is currently being staked, meaning there are fewer coins on the open market, aggressive buying from fund issuers could contribute to a supply squeeze that drives prices higher.