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Industry Experts Anticipate No Institutional Demand for Ethereum ETFs

2 mins
Updated by Bary Rahma
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In Brief

  • Ethereum's lack of excitement compared to Bitcoin ETFs may be due to market cycles, investor understanding, and unique attributes.
  • Raoul Pal, CEO of Real Vision, suggests institutional investors might prefer direct Ethereum ownership over ETFs for staking yields.
  • Peter Brandt, a seasoned technical analysts, has a bearish outlook on Ethereum, predicting a potential price correction to $1,000.
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In the cryptocurrency market, the buzz around Bitcoin ETFs (exchange-traded funds) has been monumental. Yet, when it comes to Ethereum, the second-largest crypto by market capitalization, the excitement seems muted.

According to industry leaders, a combination of market dynamics, investor understanding, and the unique attributes of Ethereum itself may be the reason behind it.

Institutional Interest in Ethereum ETFs

Raoul Pal, CEO of Real Vision, highlighted a crucial difference between Bitcoin and Ethereum. “Ethereum offers a broader-based technology bet and yields that Bitcoin does not,” he stated. This distinction is vital for institutional investors, who are not just looking for price appreciation but also additional benefits.

Pal argued that if Ethereum ETFs do not offer staking yields, institutions may prefer to own Ethereum directly. This preference is because holding the asset allows them to stake it and earn yields, an option not typically available through ETFs.

For instance, at Coinbase, Ethereum stakers currently receive an annual yield of 3.46% when they hold ETH for a year. Presently, the staking ratio for Ethereum, which reflects the proportion of eligible tokens actively engaged in staking, is at 23.32%.

Read more: 9 Cryptocurrencies Offering the Highest Staking Yields (APY) in 2024

The idea of Ethereum ETFs, therefore, may become less attractive to institutional investors, who could see more benefit in direct ownership. Pal raised concerns about the possible dynamics, where asset managers could capitalize on the staking yields without passing these benefits to ETF holders. This scenario could lead to a lack of institutional interest in Ethereum ETFs.

“A lot of the institutions would prefer to own ETH itself because then they can stake it and get yield. If you don’t give them yield, some asset manager who launches the ETF is going to get rich. [For example,] BlackRock will make all the money because they’ll get the ETH staking yield and they don’t give it to the to the ETF holders,” Pal said.

ETH Price Prediction: Correction Ahead

On the other hand, Peter Brandt, a seasoned trader, expressed a bearish view on Ethereum. His approach as a swing trader reflects a short-term, speculative interest in shorting it rather than a long-term investment.

According to Brandt, ETH trades inside a wedge, which could soon lead to a correction toward $1,000 or even as far as $650.

“My bias remains to be short ETH. I’m a swing trader in ETH, not a hodler. The chart lacks underlying strength IMO. If I go short below $2,100 and am wrong, that’s not a big deal to me,” Brandt said.

Ethereum Price Performance
Ethereum Price Performance. Source: TradingView

While Bitcoin and Ethereum are both leading cryptocurrencies, they appeal to investors for different reasons. Bitcoin is often viewed as a “digital gold,” a store of value, while Ethereum is seen as a platform for building decentralized applications and smart contracts.

This fundamental difference influences how ETFs for each cryptocurrency might be perceived and utilized by different investor classes and how it may affect prices.

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Bary Rahma
Bary Rahman, a talented journalist, graduated from New York University with a degree in Journalism. Skilled in SEO, she has worked with CNN, showcasing her investigative skills and storytelling abilities. In addition to her journalistic accomplishments, Bary has contributed her expertise as a content writer for Binance, crafting insightful articles on the dynamic crypto industry. Her unique fusion of journalism and SEO makes her a versatile and highly respected figure in the industry.