Future Outlook for Crypto ETFs: What Lies Ahead?

VettaFi Explores the Crypto ETF Landscape in the Aftermath of Ether Futures Launch

In the world of cryptocurrency, it has been several weeks since the inception of ether futures exchange-traded funds (ETFs). This event occurred with minimal fanfare in early October. However, the crypto ETF market has experienced a series of notable developments, resulting in a substantial surge in Bitcoin’s value, nearing the $35,000 mark. The burning question now is: what is the current status of ether futures ETFs, and what aspects are investors closely monitoring within the realm of cryptocurrency ETFs? Here, we delve into three critical insights.

Unanticipated Lack of Hype… Yet, It Was Expected.

Future Outlook for Crypto ETFs
Future Outlook for Crypto ETFs

When the inaugural U.S. Bitcoin futures ETF, ProShares Bitcoin Strategy ETF (BITO), took flight on October 18, 2021, it made an indelible impact. This ETF swiftly rose to become the second most heavily traded ETF worldwide, amassing a staggering turnover of over $1 billion on its inaugural day. In stark contrast, all seven ether futures ETFs collectively traded a mere $7 million on October 7.

However, it’s essential to recognize that this was a different era. At that time, Bitcoin’s price was soaring to its zenith, surpassing $69,000, while Ethereum’s valuation was reaching its own peak of over $4,800. Mainstream investors were brimming with enthusiasm for the world of cryptocurrencies, and Bitcoin futures ETFs were well-positioned to ride that exhilarating wave.

Although Ethereum held a somewhat lesser allure than Bitcoin in the eyes of investors, there remained a significant void in the market that needed to be filled. This void, in particular, catered to investors seeking an avenue through which to encompass the entire spectrum of the crypto market within their investment portfolio. For a more comprehensive exploration of the initial launch of ether futures ETFs, refer to the earlier research note.

Spot bitcoin ETFs spotted ahead what about spot ether ETFs?

Future Outlook for Crypto ETFs
Future Outlook for Crypto ETFs

The imminent arrival of spot Bitcoin ETFs is now on the horizon, stirring anticipation among investors. This development sparks an intriguing question: what about spot Ether ETFs? For the past few months, the discourse has revolved around the merits of spot ETFs compared to their futures counterparts.

A key drawback associated with futures Bitcoin ETFs lies in the roll costs, which can lead to a performance lag when compared to the spot Bitcoin market. Consequently, as spot Bitcoin ETFs edge closer to approval, it’s only natural that investors are also eagerly awaiting the debut of spot Ether ETFs.

The timeline for the potential approval of spot Bitcoin ETFs is fast approaching, with approval possibly occurring by the end of this year or at the latest, in early 2024. January 10 holds particular significance as it marks the final deadline for Ark’s spot Bitcoin product, making it a crucial date to monitor closely.

A few days ago, the deadline passed for the SEC to contest the Grayscale court decision, and this bodes well for the prospect of spot Bitcoin ETF approval. Subsequently, multiple issuers have made amendments to their spot Bitcoin ETF applications. Notable names such as Blackrock, Fidelity, Ark, Vaneck, and Valkyrie have all made adjustments. While most of these updates appear to be standard disclosures or clarifications regarding the market environment, their significance lies in the fact that the SEC is engaging in discussions with these issuers. Although it doesn’t guarantee approval, it is an encouraging signal.

Presently, approximately 12 spot Bitcoin ETFs are in the pipeline, and it’s likely that they will all receive approval around the same time, similar to what we witnessed with the launch of Ether futures ETFs. Additionally, there are five filings for spot Ether ETFs, including a conversion by Grayscale. These spot Ether ETFs may secure approval following the green light for spot Bitcoin ETFs in 2024.

Once these spot-based products are introduced to the market, we can anticipate a reduced overall demand for futures-based Bitcoin and Ether ETFs, except in situations where investors specifically seek inverse or leveraged exposure. This trend has been noticeable throughout the year, as thematic crypto ETFs have recorded nearly 100% year-to-date growth but have attracted relatively modest inflows due to investor hesitance in venturing beyond spot-based investments.

Read Also: How To Earn Crypto Airdrops | Complete Guide 2024

What does it mean for the crypto market?

The impact of crypto ETF news on the crypto market cannot be understated, as recent events have demonstrated. On October 16, there was a widespread rumor that an iShares spot ETF product had received approval. Although this rumor was later debunked, it managed to drive up the price of Bitcoin by 10%. This significant price surge underscores that the market had not yet fully factored in the possibility of an ETF approval. While a 10% increase may seem relatively modest given the importance of the news, it’s important to note that the market had limited time to adjust before the news was contradicted.

When these spot ETFs do receive actual approval, we could anticipate a much more substantial and sustained price surge, accompanied by renewed interest from investors in the crypto sphere. A significant portion of this heightened demand may originate from retail investors who aspire to invest in Bitcoin or Ether through their conventional brokerage accounts, without the need for exposure through futures ETF products or equity ETFs.

Since the launch of Ether futures ETFs, both Bitcoin and Ether have experienced notable price hikes. Bitcoin’s value has already surged by more than 23%, while Ether’s price, although showing growth, has been relatively less sensitive, with an increase of only 4%. This trend suggests that the introduction of spot ETFs could potentially have a pronounced impact on the market, stirring substantial price movements and increasing investor participation, particularly among retail investors seeking accessible avenues for crypto investment.

source: www.etftrends.com

Leave a Comment