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As the cryptocurrency market eagerly awaits the launch of Ethereum exchange-traded funds (ETFs), demand may not be as strong as many analysts predicted, according to algorithmic trading firm Wintermute.
The anticipated introduction of Ethereum ETFs comes six months after the successful introduction of Spot Bitcoin ETFs, which amassed an impressive $13.8 billion in their first 100 days of trading.
While the impending launch of Ether ETFs on July 23 has generated considerable interest, market experts are divided on their potential performance.
“Analysts have differing opinions on Ethereum ETFs, with most estimates putting first-year annualized flows in the range of $4.8 billion to $6.4 billion,” says a new report from Wintermute.
The company’s own analysis, however, suggests a more conservative outlook.
“We believe ETFs will likely see lower demand than expected, closer to $3.2 billion to $4 billion,” the report said. With a “baseline expectation” that Ethereum ETFs will see 15% to 20% of the flow seen for Bitcoin ETFs, Wintermute forecasts a price increase of 18% to 24%.
This is lower than some analysts were expecting, with one recently predicting that the price of ETH will reach $5,000 following the launch of Ethereum ETFs, a 50% increase.
The report attributes these less optimistic forecasts to two key factors. First, “the lack of a staking mechanism diminishes Ethereum’s appeal as an ETF vehicle.”
The inability to stake Ethereum in these ETFs could make them less attractive to yield-seeking investors who might otherwise be attracted to the potential returns offered by direct Ethereum holdings, the company said.
Second, the report cites “the lack of a common narrative to attract investors” as a potential obstacle for Ether ETFs.
Unlike Bitcoin, which has successfully tapped into the “digital gold” narrative, Ethereum’s more complex ecosystem and diverse applications may make it difficult to present a unified investment thesis to potential ETF buyers, Wintermute said, noting that Ethereum’s flexibility may still appeal to some.
“Within the ecosystem, Ether functions not only as a digital currency, but also as a robust platform for decentralized applications (dApps) and smart contracts,” the report said. “This dual functionality has the potential to attract investors interested in technological innovations and the various applications of blockchain technology.”
Edited by Ryan Ozawa.
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