Spot Ether ETFs Destined to Be the ‘Sidekick’ to Bitcoin ETFs

Eric Balchunas believes that the inflows generated from spot Ether ETFs may fall short of the record-breaking inflows seen with spot Bitcoin ETFs.

A few people in the crypto space, including Eric Balchunas, believe the upcoming launch of spot Ether ETFs in the United States will be much less impactful compared to spot Bitcoin ETFs. He attributes this to Bitcoin's simpler narrative as "digital gold" versus Ethereum's complex association with decentralized finance (DeFi). While Peter Schiff is still skeptical about Bitcoin ETFs, especially after BTC’s rough past day in the market, other analysts predict that Ether ETFs could boost ETH’s price post-launch. Over the past 24 hours, the crypto market experienced $665 million in liquidations, driven by Bitcoin's selling pressure.

Ether ETFs to Play Second Fiddle to Bitcoin ETFs

For many people in the crypto industry, the upcoming launch of United States-based spot Ether exchange-traded funds (ETFs) is anticipated to be a minor event compared to the more established spot Bitcoin ETFs. Eric Balchunas, a senior ETF analyst at Bloomberg, suggests that the inflows generated from spot Ether ETFs may fall short of the record-breaking inflows seen with spot Bitcoin ETFs

He pointed out that Bitcoin’s role as “digital gold” is more straightforward for investors to grasp, whereas Ethereum’s association with the decentralized finance (DeFi) ecosystem makes it a bit more complex and harder for traditional retail investors to understand. Balchunas believes this complexity may lead to Ether being considered as a "sidekick" to Bitcoin.

While some experts are concerned that the industry is setting high expectations by comparing the Ether ETF launch to Bitcoin’s exceptionally successful launch, others are more optimistic. Ophelia Snyder, co-founder of 21Shares, expects the Ether ETF launch to perform well. She acknowledges that while the Bitcoin ETF launch set a high bar, the Ether ETFs should still be considered a success even if they do not reach similar levels of inflow.

Data from Dune indicates that US-based spot Bitcoin ETFs accumulated more than $701 million worth of Bitcoin in the first week and surpassed $540 billion in the second week of trading. This sets a very high benchmark for the upcoming Ether ETFs.

With regards to the timing of the Ether ETF launch, SEC Chair Gary Gensler stated on June 25 that the process is progressing smoothly. However, he did not confirm whether the ETFs would be available before the November election. 

The SEC approved initial filings from eight ETF bidders on May 23, and asset managers are currently finalizing their Form S-1s, which are necessary for the SEC’s final approval. Some analysts predict that the SEC could approve these funds for trading as early as the first week of July, which will be coming to an end soon.

Galaxy Digital’s ETH ETF Expectations

Galaxy Digital’s head of asset management, Steve Kurz, believes that spot Ether ETFs will receive approval from the SEC within “weeks” rather than days, but agrees a decision is still expected sometime in July. Speaking on Bloomberg TV on July 2, Kurz shed some light on the methodical nature of the approval process, and drew parallels to the earlier Bitcoin ETF approval. Galaxy Digital, in collaboration with Invesco, is one of eight asset managers with a proposed spot Ether ETF currently under SEC review.

Kurz’s timeline aligns with estimates from other ETF analysts such as Balchunas. A Bloomberg report on July 2 suggested that Ether ETF applicants have until July 8 to submit updated paperwork to address minor issues, potentially followed by another round of filings.

The eight bidders, including BlackRock, Fidelity, 21Shares, Grayscale, Franklin Templeton, VanEck, iShares, and Galaxy/Invesco have already received preliminary approval to list their shares on their respective exchanges. 

In contrast to Balchunas’ opinion, a July 2 research report by K33 Research predicted that Ether ETFs could greatly impact ETH’s price, causing it to potentially outperform Bitcoin in the initial weeks post-launch. Although K33 analysts Vetle Lunde and David Zimmerman anticipate a temporary stumble for Ether immediately after the launch, they expect inflows to the funds to subsequently bolster ETH’s price, mirroring the pattern seen with Bitcoin ETFs.

Peter Schiff Doubles Down on ETF Skepticism

While Balchunas is doubtful about the performance of Ether ETFs after they launch, things are not looking too great for Bitcoin ETFs either. Peter Schiff, a well-known Bitcoin critic and financial analyst, remains steadfast in his skepticism of Bitcoin ETFs. 

Schiff is now predicting major losses for investors as BTC’s price continues to fall from its peak. With Bitcoin currently trading hands at around $55,000, Schiff pointed out that over 70% of investors who bought into Bitcoin ETFs at higher prices are now facing losses. He also expects that if the market's downturn continues, all investors could see their holdings decline. 

Schiff’s comments sparked mixed reactions on social media. His latest prediction is especially grating to the crypto community considering his long history of pessimism about Bitcoin's role in financial markets. He is also notorious for clashing with the more optimistic views of other investors and analysts. Some social media users suggested that Schiff's predictions might be inversely correlated with actual market outcomes.

Despite the potential for regulatory advancements that could support the cryptocurrency market, Schiff seems committed to maintaining his grim outlook towards Bitcoin ETFs.

Crypto Market Sees $665M Liquidations

The crypto market had a very tough past 24 hours as it experienced over $665 million in liquidations. This happened as Bitcoin faces heavy selling pressure because of ongoing movements from Mt Gox for payouts and massive BTC transfers by the German government. 

Over the past day of trading, the price of BTC dropped by 4.08% to trade at $55,361.14 at press time, according to CoinMarketCap. During this time, the crypto king hit a low of $53,717.38, influenced by Mt Gox’s transfer of about $2.7 billion worth of Bitcoin in preparation for creditor payouts. 

Bitcoin 1d chart (Source: CoinMarketCap)

According to Coinglass data, 230,541 traders were liquidated, amounting to $665.8 million across centralized exchanges. Bitcoin led the liquidations with over $222.1 million, of which $181.8 million were long positions. Ether also faced substantial liquidations, with $163.4 million, including $143.3 million in long positions, as its price fell 6.45% to $2,946. 

Crypto liquidations happen when traders' positions are forcibly closed because of big losses or insufficient margin to meet maintenance requirements.

On Thursday night, Mt Gox moved 47,228.7 BTC ($2.71 billion) to a wallet, transferring 44,527 BTC to another address and sending 1,545 BTC ($85 million) to a hot wallet on Bitbank. Peter Chung, the head of research at Presto Research, pointed out that Bitcoin Cash (BCH) might experience even stronger selling pressure than Bitcoin due to its weaker investor base, with creditors likely to cash out immediately.

Ben Caselin, chief marketing officer of VALR, a Pantera-backed crypto exchange, stated that the current volatility and selling do not alter Bitcoin’s fundamental value. He suggested that prices might remain in the lower $50,000s for weeks, and that price movements are primarily a concern for short-term speculators.