Ethereum-based spot exchange-traded funds will see less demand compared to similar bitcoin products. The reason for this is the lack of staking, according to Bernstein. Will ETH see high conversion in exchange traded funds?
According to Bernstein’s report, ETH will not see high spot conversion in ETFs. This conclusion is based on several factors:
1. The lack of staking is a key reason why analysts expect to see lower demand for spot ETH ETFs. Staking allows ETH holders to earn passive income, but this feature is not available in ETFs.
2. ETH ETFs attract funds from the same stakeholders as spot bitcoin ETFs, so this is expected to happen on a more limited scale.
3. Despite the expected lower demand, Bernstein notes that underlying trades may find buyers, which would contribute to a fair amount of liquidity in the ETH ETF market. These trades involve the simultaneous purchase of a spot ETH ETF and the sale of an Ethereum futures contract, with the expectation of subsequent price convergence. Such trading activity could breathe new life into the ETH ETF market.
We tend to agree with Bernstein that we should not expect high spot conversions in exchange-traded funds anytime soon. Those who are interested in ETFs as an investment asset and need protection from regulators will buy ether through funds. And at first this will be a test investment in cryptocurrency.