As anticipation builds for the launch of an Ethereum exchange-traded fund (ETF), the focus is shifting to the next potential developments in the ETF market. Amidst these discussions, the prospect of a Shiba Inu (SHIB) ETF is gaining traction.
Shiba Inu marketing lead Lucie believes that an ETF is likely due to institutional interest in SHIB.
Pros and Cons of a Shiba Inu ETF
Lucie outlines the significant benefits of a SHIB ETF, particularly in enhancing accessibility. Traditional investors interested in Shiba Inu currently face the complex challenge of exploring through crypto exchanges. An ETF would simplify this process by being a regulated financial product, which would also attract more institutional investors with its added security and compliance.
Another major advantage is diversification. An ETF could mitigate investment risks by including a variety of related assets.
“Listing SHIB in an ETF could boost demand and liquidity, potentially increasing its value,” Lucie said.
Read more: 6 Best Platforms To Buy Shiba Inu (SHIB) in 2024
However, the transition to an ETF format presents notable drawbacks, especially for the decentralized finance (DeFi) sector. Lucie points out a key contradiction, i.e., ETFs centralize control, which clashes with the decentralized principles of DeFi. While ETFs can provide stability, they might restrict community governance over the asset.
Additionally, ETF investors would lack direct ownership of SHIB tokens, barring them from participating in crucial DeFi activities like staking and governance. This arrangement simplifies investing but diminishes investor engagement with Shiba Inu. Also, ETFs could attract passive investors and reduce active participation in DeFi protocols, potentially weakening the ecosystem.
There are also financial and regulatory concerns to consider. ETFs entail management fees and come under strict regulatory scrutiny, which might deter DeFi enthusiasts who are sensitive to costs. Yet, these factors could provide necessary security and legitimacy for investors who are more risk-averse.
“SHIB, as a memecoin, is often viewed as a more speculative and volatile asset. TradFi institutions may need to put extra regulatory consideration when considering SHIB as a potential ETF. Institutions are eager to access the crypto market through a compliance pathway, and the addition of institutions can bring liquidity to the crypto market. However, since institutions will hold a large amount of SHIB in order to issue ETFs, the centralized risk and high probability of collapse risk brought by this move are not recognized by community members. When the community attitude is low, the price of SHIB is more likely to go down,” BloFin Research analyst Edward told BeInCrypto.
Read more: 7 Hot Meme Coins and Altcoins that are Trending in 2024
Lucie also raises concerns about potential market manipulation. Centralizing SHIB control through an ETF could lead to market manipulation, which contradicts DeFi’s goal of transparency. Although this might stabilize a volatile market, it could undermine the core principles of decentralized finance.
Meanwhile, speculation about other potential meme coin ETFs continues to grow. Researcher Sterling Crispin suggests that following a Solana (SOL) ETF, Dogecoin (DOGE) might be next.
Furthermore, Coinbase derivatives will launch a regulated futures contract for Shiba Inu on July 15. Shiba Inu enthusiasts view this as a stepping stone to an ETF since regulated futures often precede spot ETFs. Such contracts offer enhanced transparency, regulatory oversight, and a compliant trading environment, facilitating effective risk management.
“Crypto futures often lead to crypto spot ETFs,” Altcoin Daily said.
While the US Securities and Exchange Commission (SEC) has approved spot ETFs for Bitcoin and Ethereum following their regulated futures, the highly volatile nature and specific risks associated with meme coins like SHIB pose significant regulatory challenges. Given the SEC’s current view of the crypto industry as fraught with fraud risks, the approval of a meme coin ETF may not be imminent.
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