Asset Manager Says Ethereum ETFs Could Be Even Bigger Than Bitcoin ETFs: Where Investors Are Placing Their Bets

Spot Bitcoin exchange-traded funds (ETFs) have been a catalyst for Bitcoin. They brought in billions of dollars and helped propel Bitcoin to new highs before its upcoming halving. These ETFs were the first of their kind, allowing equity investors to gain direct exposure to cryptocurrencies. Their approval has sparked significant discussions revolving around spot ETFs of some of the other top tokens, with Ethereum ETFs at the forefront. 

The second-largest token by market cap, Ethereum focuses on providing a platform for and access to decentralized finance (DeFi). The blockchain hosts some of the top projects in crypto, ranging from AI tokens to meme coins and everything in between.

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Talks of an Ethereum ETF have been heating up. While applications were submitted throughout 2023, Bitcoin ETFs overshadowed them in discussions with the U.S. Securities and Exchange Commission (SEC). With Bitcoin ETFs released, regulators and potential sponsors are ramping up ETH ETF discussions.

Most analysts believe that Ethereum ETFs will be approved because Bitcoin ETFs set a precedent and demand from investors exists. Ethereum ETFs are more a question of when rather than if. 

Additionally, Ethereum has unique characteristics that could make it a great fit for investors. Specifically, Ethereum's consensus mechanism allows users to stake tokens in exchange for fees. In practice, it works similarly to stock lending, which can allow you to earn extra cash on assets you are holding. 

"The world of investors who are looking for cash-producing assets is massive and ETH obviously generates fees that go to the token holders," said VanEck Portfolio Manager Pranav Kanade. 

VanEck is one of the companies that released a Bitcoin ETF in January and has applied for an Ethereum ETF. Kanade added that "from a market perspective, part of me believes that the market size for a spot ETH ETF is potentially as big if not bigger than the spot Bitcoin ETFs," showing that he is confident in ETH's ability to attract investors. Spot Bitcoin ETFs have been the most successful ETFs in history, attracting more investment than any other ETF in its first months of launch.

Markets seem to agree with Kanade. Ethereum is up over 100% in the past six months. Additionally, tokens that focus on staking, which is one of the major appealing aspects of ETH, have seen solid price increases recently: Avalanche (AVAX) is up nearly 500% in the past six months, and EigenLayer has attracted more than $11 billion in investment. 

Investors have shown interest in staking outside of Ethereum and for Ethereum in general. Spot Ethereum ETFs would combine the two, potentially creating an ETF sector larger than that of Bitcoin. 

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