Spot Ethereum ETFs are expected to start trading this week, a big event since January when the Securities and Exchange Commission (SEC) approved Bitcoin funds.
Participants in Polymarket’s betting platform have staked $250k, with a probability of the listing standing at 99%. This is an important event since Polymarket has been highly accurate on key issues in the past few months.
Why spot Ethereum ETF matters
There are signs that the SEC will approve ETFs by companies like Blackrock, Invesco, and Franklin Templeton. Most of these issuers have already published their final filings and analysts believe that it is just a matter of time.
An Ethereum ETF is important for three main reasons. First, under Gary Gensler, the SEC has consistently said that Ether is a security following the merge event in 2022. This merge event combined the previous Ethereum with the beacon chain, which introduced the concept of staking.
Staking is a process where investors allocate their coins to delegators and then earn a return, often monthly. Data shows that investors have staked tokens worth over $116 billion, giving it a staking ratio of 27%. ETH yields about 3.12%.
Other altcoin ETFs
Second, this approval will open the floodgates in the crypto industry where more companies will file altcoin funds. VanEck has already filed a spot Solana ETFpapers, a move that will be replicated by other companies.
Solana is an obvious choice because it has grown into the biggest chain in the world after Ethereum. Its DEX platforms have gained substantial market share and are handling most of the volume in the industry.
Similarly, Solana meme coins like Book of Meme, Popcat, and Dogwifhat have gained substantial market share. Also, Solana has become the biggest blockchain for Decentralized Public Infrastructure (DePIN) networks.
Other likely blockchains that could see ETF applications are the likes of Chainlink, Polkadot, Cardano, and BNB.
Ethereum supply is falling
Third, the ETF approval matters because of the ongoing Ethereum supply dynamics. As shown below, the volume of Ether tokens in exchanges is hovering at a record low. As such, falling supplies and high demand from ETFs mean that the token’s price could soar.
A good example of this is what happened with Bitcoin ETFs. Data shows that these funds have accumulated over $17 billion in inflows in the past few months. As such, analysts believe that Ethereum funds could accumulate Ether ETFs as well.
Besides, Ether has some solid fundamentals. It is the second-biggest cryptocurrency in the world, the biggest chain in areas like DeFi, and the most profitable. Data shows that Ethereum’s network has made over $1.8 billion in revenues this year.
Which will be the best Ethereum ETFs?
As I have written before, I would not recommend investing in any Ethereum ETF for a simple reason. These funds, as we have seen with Bitcoin, will track the price of BTC in the long term.
Spot Ethereum ETFs will track Ethereum as well, meaning that investing in ETH will lead to better returns than these funds.
As an ETF investor, you will need to pay an annual fee to the issuer. The recent filings show that most funds will have a waiver, where users will not be charged. These fees will then apply after a few months.
In the long term, however, these fees are unavoidable. The most expensive ETF will be the Grayscale Ethereum Trust (ETHE), which will charge 2.50%. This is an exorbitant high fee for any ETF.
After the waiver, the cheapest Ethereum ETF will be the Franklin Ethereum ETF (EZET), which will have a fee of 0.129%. It will be followed by the VanEck (ETHV) and Bitwise (ETHW) Ethereum ETFs, which will charge 0.20%.
The other funds from Fidelity (FETH), Blackrock (ETHA), Grayscale Mini Trust (ETH), and Invesco Galaxy ETF (QETH) will charge 0.25%.
Okay everyone. Here are the details for the #Ethereum ETFs that we expect to launch next week. We are only missing details for Proshares’s ETF. 7 of the 10 funds have fee waivers. pic.twitter.com/5v3QnHOeub
— James Seyffart (@JSeyff) July 17, 2024
Investing in these ETFs also means that users will not benefit from the staking rewards. Data by StakingRewards shows that the token has a yield of 3.30%. This reward means that a $100,000 investment will generate an annual reward of $330. In a decade, this reward will be over $3,300, which ETF investors will forego.
Therefore, altogether, you can lose over 3.35% in terms of fees and staking rewards by just investing in Ethereum ETFs.
Ethereum price forecast
The approval of spot Ethereum ETFs will have a positive impact on the token’s price, which explains why it has jumped by over 24% from its lowest point this month. It has also moved to its highest point since June 22nd.
In theory, Ethereum price should rise after the spot Ethereum ETF approval because of the high demand and diminishing supplies. In this case, the token could rise to about $3,800. However, in reality, the token could drop as investors sell the news. Besides, the ETF approval has been already priced in by market participants.
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