BlackRock's spot Ethereum ETF begins pre-market trading amid muted demand predictions

Key Takeaways

• BlackRock's Ethereum ETF started pre-market trading early on July 23, 2024, after SEC approval.
• Analysts estimate up to $5.4 billion inflows into the ETFs within six months.

BlackRock’s Spot Ethereum ETF has commenced pre-market trading early Tuesday, following the SEC’s approval for multiple spot Ethereum ETFs .

This development allows mainstream investors to directly invest in Ethereum without managing the digital asset themselves, although functionality for staking and other stake-based derivatives have been removed prior to the approval.

In an advertisement video for its Ethereum ETF, BlackRock’s US Head of Thematic and Active ETFs Jay Jacobs said:

“While many see Bitcoin’s key appeal in its scarcity many find Ethereum’s appeal in its utility […] you could think of Ethereum as a global platform for applications that run without centralized intermediaries.”

The SEC’s approval for major asset management firms including Fidelity, Grayscale and Franklin Templeton, represents a major milestone for Ethereum and the broader crypto market. Trading of these ETFs is scheduled to start today at 9:30 AM EDT. At the time of writing, Ethereum’s price stands at approximately $3,525, up 1% over the past 24 hours, according to data from CoinGecko.

While some analysts predict these ETFs could see inflows of up to $5.4 billion in the first six months, algorithmic trading firm Wintermute offers a more conservative outlook. The firm forecasts lower-than-anticipated demand, projecting inflows closer to $3.2 to $4 billion. Wintermute expects Ethereum ETFs to see 15% to 20% of the flow observed for Bitcoin ETFs, potentially leading to an 18% to 24% price increase for ETH.

Two factors for ‘muted demand’ on Ethereum ETFs

Wintermute attributes its less optimistic forecast to two key factors.

Primarily, the absence of a staking mechanism within the ETFs may diminish Ethereum’s appeal as an investment vehicle. Staking, a core component of Ethereum’s security model since its shift to proof-of-stake in 2022, allows users to earn rewards by delegating tokens to the network.

The inability to stake Ethereum within these ETFs could make them less attractive to yield-seeking investors. Crypto Briefing’s previous coverages on this matter explain the nuances in detail .

Wintermute also cites the lack of a shared narrative to attract investors as a potential hurdle for Ether ETFs. Unlike Bitcoin, which has successfully tapped into the “digital gold” narrative, Ethereum’s more complex ecosystem and diverse applications may make it challenging to present a unified investment thesis to potential ETF buyers.

Despite these challenges, Ethereum’s dual functionality as both a digital currency and a platform for decentralized applications and smart contracts may appeal to investors interested in technological innovations and diverse blockchain applications, Wintermute claims. The launch of Ethereum ETFs represents a significant step in making crypto investments more accessible to mainstream investors, potentially impacting both the crypto market and the broader financial landscape.