Analysts predict that the Securities and Exchange Commission (SEC) will approve bitcoin spot ETF applications in January 2024, following bitcoin-etf-opening-crypto-to-wider-investor-base/”>the approval of bitcoin (btc) futures ETF in October 2021 and Ether (eth) futures ETF in October 2023.
In anticipation, traditional financial institutions also applied to issue Ether spot ETFs. Given that applicants like BlackRock have a near-perfect track record in obtaining SEC approval for their ETFs, Ether spot ETFs will likely be approved as well. However, the SEC could approve them only after their bitcoin counterparts, which would mean approval of Ether ETFs. at the end of 2024 or beginning of 2025.
If approved, bitcoin and Ether spot ETFs will attract millions of new investors who were previously unable or unwilling to purchase crypto assets directly. Will the different investment theses of bitcoin and Ether, along with the ability of issuers to integrate the characteristics of each asset into spot ETFs, affect the success of these newly created products?
For Ether in particular, the disparity between the underlying asset's use cases and spot ETF product offerings raises questions about the viability of the product. An Ether spot ETF does not allow shareholders to participate in the ethereum network, the main reason an investor would look to acquire Ether. Meanwhile, bitcoin, which is widely used as a store of value, makes a spot bitcoin ETF a simpler investment proposition.
Ether ETFs Have No Investment Thesis
The Ether investment thesis revolves around the ability of individuals and institutions to use the eth token on the ethereum network. Unlike bitcoin, which is recognized for its monetary qualities as a store of value as well as a medium of exchange in some geographic regions, the Ether token functions as the “gas” of a technological ecosystem. One way users use eth is for staking, the process of participating in validating transactions on a proof-of-stake blockchain by locking an amount (stake) of the network's native token to validate consensus and earn a return. .
River's general director, Alexander Leishman fixed, “eth positioned itself as a technological platform and is now forced to compete as such.” The eth token's role as a utility token for the ethereum platform means that its investment thesis is not based on underlying monetary characteristics.
Ether's core value proposition makes it difficult for companies to market spot ETF products that only provide investors with price exposure. Investors do not hold Ether for its decentralization or monetary qualities. Corporations like MicroStrategy do not sell shares to buy Ether. Countries like El Salvador have not designated Ether as legal tender; in fact, as far as anyone knows, no national government is even talking about it.
Another obstacle is that apps like BlackRock's don't even mention staking, which is central to Ether's investment thesis. The SEC has been strict with crypto exchanges offering staking features as a service, making it even more unlikely that BlackRock or other issuers will gain permission to offer staking through an ETF.
bitcoin ETF
Based on current applications, detect bitcoin ETF issuers bitcoin-etf-proposal-ahead-of-rumored-sec-approvals/”>will not offer exchanges in kind, meaning that shareholders cannot take custody of their bitcoin. Therefore, such products introduce additional counterparty risk. However, shareholders gain exposure to the price of bitcoin. This allows them to benefit from price appreciation even if annual management fees reduce their profits.
With a spot bitcoin ETF, issuers can count on demand from market participants who view bitcoin as a store of value and seek price exposure over long periods. The store of value investing thesis makes it easier for Wall Street firms to market spot bitcoin ETF products to financial advisors and retail investors.
Anticipating the approval of bitcoin spot products, traditional financial leaders such as BlackRock CEO Larry Fink have changed their rhetoric. They no longer put out phrases like “a money laundering index” when it comes to bitcoin. Instead, Fink now calls it an “international asset” that is “digitizing gold” and represents a “flight to quality” for investors.
Fink's description reflects the perception of the bitcoin product market in Western markets as a store of value due to its decentralization and the network's monetary policy. Some US-based companies they are creating bitcoin products focused on payments, but most bitcoin holders store wealth in bitcoin for long periods.
Thinking in the future
He mediocre launch of the Ether futures ETF in October could indicate that an Ether spot ETF will be in similarly low demand. The underlying investment theses of bitcoin and Ether will determine the demand for ETFs issued against these assets. Since Ether's utility comes from its ability to be used within the ethereum ecosystem, a spot eth ETF is unlikely to be a valuable product offering.
This is a guest post by David Waugh. The opinions expressed are entirely their own and do not necessarily reflect those of btc Inc or bitcoin Magazine.
