U.S. regulators will likely reject ethereum (eth) spot ETFs, and cryptocurrencies won't put up much of a legal fight over it, according to Bloomberg ETF analyst Eric Balchunas.
The analyst's latest opinion is a discouraging sign for ethereum bulls and stands in stark contrast to his previous optimism about bitcoin spot ETFs before their approval in January.
Are ethereum ETFs worth fighting for?
on a wednesday twitter.com/EricBalchunas/status/1778186317165437292″ data-wpel-link=”external” target=”_blank”>cheepBalchunas addressed a common theory that the crypto industry will sue the Securities and Exchange Commission (SEC) if it refuses to approve eth spot ETFs before May, which is its final deadline to issue a verdict for several applicants.
“I would question this since Ether futures ETFs alone have 4% of the assets that bitcoin futures have,” Balchunas wrote. “That's a lot of time and money for something that may only get a fraction of the aum.”
The ProShares bitcoin Strategy ETF (BITO), the country's first bitcoin futures ETF, raised $1 billion in its first two days of launch in 2021. It now holds $2.7 billion in bitcoin futures contracts, while its largest leveraged rival owns another $1.6 billion.
By comparison, the ProShares Ether Strategy ETF launched about two years later attracted little of the same investor interest and now only has an AUM of $72 million. It's a potential sign that institutional investors don't have the same appetite for the second-largest digital asset.
Previous comments from sponsors of some of the largest bitcoin ETFs would corroborate this claim. Matt Hougan, Bit by Bit CIO twitter.com/Matt_Hougan/status/1770095212435488947″ data-wpel-link=”external” target=”_blank”>wrote last month that Ether ETFs could gain more traction if they launched much later than their bitcoin counterparts, and that btc is “twitter.com/Matt_Hougan/status/1769787284902031591″ data-wpel-link=”external” target=”_blank”>in a class of its own”in terms of institutional interest.
Additionally, Robert Mitchnick, head of digital assets at BlackRock, said in March that bitcoin is “overwhelmingly the number one priority” for cryptocurrency exposure among its client base. “Then a little bit of ethereum and very little of everything else,” he added.
What does grayscale want?
By contrast, ethereum bulls say that comparing the performance of futures ETFs is inappropriate, especially given the very different timing of their launch.
“The best comparison here is GBTC and ETHE, where GBTC had $30 billion in assets under management before the conversion (January 10) and ETHE was $7.3 billion.” twitter.com/sassal0x/status/1764286627709616295″ data-wpel-link=”external” target=”_blank”>tweeted sassal.eth in early March.
Previously, the SEC opposed bitcoin spot ETFs, claiming that such funds were more vulnerable to market manipulation compared to their futures-based counterparts.
A year-long lawsuit filed by Grayscale forced them to reverse that stance, and the ETFs were subsequently approved. Ironically, however, the increased competition generated by approvals has contributed to Grayscale bitcoin Trust (GBTC) losing almost half of its bitcoin in three months.
“Do you really think Grayscale will want to foot the legal bill for another big BlackRock hit and more outflows for something that will clearly be much less opposition?” Balchunas added.
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