In a recent interview, U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce reopened the debate on the possibility of adding staking features to ethereum ETFs (exchange-traded funds) after their upcoming launch, possibly on July 23.
Initially, ETF issuers like VanEck and Fidelity had sought approval to stake the underlying ethereum held in their productsHowever, there is speculation that they removed this component as one of the requirements for SEC approval of these index funds in May.
Reintroducing staking on ethereum ETFs?
During the interviewCommissioner Peirce expressed her view that features such as staking, omitted from approved bitcoin ETFs, remain open to reconsideration.
While acknowledging that other commissioners might not share his perspective, he stressed the possibility of reviewing the ethereum ETF product features after they begin trading. Peirce stated:
I think definitely something like staking or any product feature (we saw that in bitcoin exchange-traded products as well, right?). There were product features that some people would have liked to see included, but they weren't included; in my opinion, they are always open to reconsideration.
Peirce also expressed disappointment during his remarks about the increasingly difficult nature of cryptocurrencies. approval processes bitcoin and ethereum ETF Applications and stressed the importance of a smooth and uncomplicated product launch:
We shouldn't go out of our way to create drama around product launches like this. It should just be, you know, they can be traded and we'll see if people want to buy them or not and that should be how it plays out.
Potential benefits of staking and ETFs
Staking involves token holders Earning rewards By securing their tokens and contributing to the security of a blockchain network, in the ethereum staking process, validators lock up increments of 32 eth to activate validators responsible for data storage, transaction processing, and adding new blocks to the blockchain.
By design, the requirement for validators to secure and operate staked tokens discourages malicious behavior that could compromise the network, so the inclusion of staking would increase the potential for returns by allowing investors to be rewarded for participating in the network's consensus mechanism.
Institutional investorsRetail investors and asset managers familiar with staking as a mechanism may be attracted to investing in these ETFs, leading to increased demand and inflows into the new ethereum ETF market.
Despite the lack of staking features in the ethereum ETF market, analysts predict strong demand for ethereum ETFs in the first few months of trading, with one exception.
Mixed predictions
For example, Fundstrat’s Sean Farrell expects net inflows of more than $5 billion in the first few months of trading. Similarly, JPMorgan strategists led by Nikolaos Panigirtzoglou estimate that future Ether portfolios will attract “modest” net inflows of between $1 billion and $3 billion over the remainder of the year.
Vetle Lunde, senior research analyst at cryptocurrency specialist K33 Research, predicts Net inflows of $4 billion into ethereum ETFs in first five months and a significant “supply absorption shock” that could boost eth price.
However, Bitcoinist reported Analysts at global asset management firm Bernstein have expressed bearish sentiment on the prospects of these new ethereum ETFs as they may see less demand than spot bitcoin ETFs due to a lack of staking features.
At the time of writing, the second-largest cryptocurrency on the market is trading at $3,395, down more than 1.5% over the 24-hour period but up 9% over the past week.
Featured image of DALL-E, chart from TradingView.com
