Spot ether exchange-traded funds (ETFs) in the U.S. are set to launch soon. Despite the high anticipation, a recent Citi research report suggests that net inflows may be weak compared to their bitcoin counterparts.
According to Citi, ether ETFs could see net inflows at just 30%-35% of the levels observed for bitcoin ETFs. This means a range of $4.7 billion to $5.4 billion over six months.
The report, authored by analysts led by Alex Saunders, points out several factors that could temper the inflows for ether ETFs. Despite acknowledging the long-term diversification benefits of ether due to its extensive use cases, Citi does not find it enough. It states:
“ETH may offer diversification benefits in the long-term, given its different and more extensive set of use-cases, this is currently not the case.”
Ether ETF Development
Spot ether ETFs are expected to start trading in the U.S. next week following approval from the Securities and Exchange Commission (SEC) earlier this year. The regulator has asked the issuers to return S-1 filings, including fees, on July 17. Bloomberg ETF analyst, Eric Balchunas, updated his followers on X, stating:
“SEC finally gotten back to issuers today, asking them to return FINAL S-1s on Wed (incl fees) and then request effectiveness on Monday after close for a TUESDAY 7/23 LAUNCH. This is provided no unforeseeable last min issues of course!”
Citi Discusses Disadvantages
Despite the anticipation, Citi cautions that investors who are inclined to buy spot ETFs might view bitcoin and ether as sufficiently similar. They should split their allocations rather than viewing the two cryptocurrencies as distinct assets. This perception could result in ETH ETFs attracting flows that might otherwise have been allocated to bitcoin ETFs.
Lack of Staking Options in Ether ETFs
Additionally, the lack of staking options in ETH spot ETFs is also a potential disadvantage. Staking, which allows investors to earn rewards by holding and validating transactions on the Ethereum network, has been a significant factor in the attractiveness of ether as an investment. The absence of this feature in the spot ETFs could weaken their appeal.
BTC’s First-Mover Advantage
Bitcoin’s first-mover advantage also plays a role. Having been the first to market, bitcoin ETFs have already seen substantial inflows and significant BTC outperformance prior to the ether ETF listing approval in May. This established position could make it challenging for ether ETFs to capture a comparable level of investor interest.
The post US Spot Ether ETFs May See Modest Inflows: Citi Research appeared first on Latest News and Insights on Blockchain, Cryptocurrency, and Investing.