Ethereum Spot ETF Will Boost Demand for Ether

SCRYPT CEO Norman Wooding told crypto.news that several factors point to higher ethereum prices if the SEC approves Ether spot ETFs.

Wooding predicted that ethereum (eth) spot ETFs will follow the pattern of bitcoin (btc) spot funds and push eth prices above $4,000. According to the expert, the approval of eth spot ETFs will remove “lingering anxieties” around the second-largest cryptocurrency and boost market demand.

Wooding opined that Ether could retest its $4,800 peak if eth spot ETFs capture 10-20% of bitcoin ETF flows.

“This opens the door to a previously untapped audience, thereby increasing demand, generating an upward price trajectory in the days, weeks and months following approval,” SCRYPT CEO told crypto.news.

Grayscale’s exclusive spot bitcoin ETFs amassed over $35 billion in assets under management (AUM) in the six months following their launch. Wooding’s estimates echo a report from cryptocurrency exchange Gemini, which said spot eth funds could see $5 billion in net inflows over the same six months.

No staking, higher performance

Just as observers have deemed eth spot ETFs a matter of when rather than if, skeptics have also debated why ethereum should have an institutional wrapper that tracks Ether spot prices.

bitcoin is primarily considered digital gold and a store of value, while ethereum functions as a smart contract-driven ecosystem for decentralized applications. This market relies heavily on Ether as a liquid asset and economic vehicle.

However, ETFs hold assets and wait for prices to rise, potentially leading to large amounts of idle Ether. The problem is further exacerbated by the absence of staking activity in the proposed eth spot pools. Flipside crypto data scientist Carlos Mercado said it’s not the best use case for Ether, but Wooding insists the outcome can be positive for eth proponents.

According to Wooding, reduced liquidity and idle eth could more directly incentivize Ether staking, resulting in higher on-chain throughput as spot ETFs capture significant supply.

“While idle eth in ETFs could reduce DeFi liquidity, broader market exposure and increased participation could eventually drive more direct engagement with staking and DeFi, balancing out the initial impact,” Wooding told crypto.news via email.

When will we see an ethereum spot ETF?

After the U.S. Securities and Exchange Commission (SEC) issued initial approval for spot eth ETFs last month, issuers and experts expect the final green lights to come before the end of the third quarter of 2024. Bloomberg analyst James Seyffart suggested regulatory approval could happen this month, and SEC Chairman Gary Gensler told Congress to expect an outcome by the end of the summer.

While there is speculation that the SEC could reject issuers, especially after the agency sued Consenys over its MetaMask wallet and staking offerings, Wooding is confident the regulator will approve eth spot ETFs this month.

According to Wooding, denying ethereum funds could undermine the SEC’s credibility and competence. The SCRYPT CEO added that a denial could also lead to further regulatory debate and result in better, more refined future proposals.

Furthermore, Ether prices may fall if the SEC denies spot Ether ETFs. However, Woodings surmised that such an outcome is unlikely and that a market downturn would be short-lived in any case. “ethereum’s fundamental value and utility remain strong, and the market would likely stabilize as investors refocus on its technological developments and applications,” according to Wooding.