The introduction of spot Ether ETFs can lead to Ether’s value falling by as much as 30% to approximately $2,400. Andrew Kang, the founder and partner of Mechanism Capital, the venture capital company that focuses on cryptocurrencies, expressed his concerns to X regarding this issue based on several factors, including low institutional adoption and possible motivations for holders of spot Ether to swap it for ETFs rather than BTC.
As the bitcoin market navigates the most recent governmental approvals, Kang’s viewpoint couldn’t be more relevant. According to him, introducing ETH as an ETF would not be very profitable. However, he believes that following its launch, Ether will only be able to move in the $2,400 to $3,000 range. In March, the value of Ether exceeded $4,000, positioning it at the heart of Bitcoin’s ACH. However, this projection indicates that it has experienced a substantial decline from its all-time high. Before the SEC allowed Ether ETFs, it was almost at these levels.
As stated by Kang, the projected investment flows for Ether ETFs will be much less than those of Bitcoin. He estimates that Ether ETFs will attract only around 15% of the total investment flows observed by Bitcoin ETFs. This is in agreement with Bloomberg’s Eric Balchunas and James Seyffart, who forecast that such flows could be anywhere between 10% and 20%. When translated to real numbers, this could mean about $840 million in Ethereum investments during the same period.
Kang also criticized the numerous Ethereum pitches, such as a decentralized financial settlement layer, a world computer, or even a Web3 app store. He further disputed the notion that there is sufficient evidence to support these assertions. Kang also notes that Ethereum was previously regarded as one of the most profitable platforms during the DeFi and NFT manias. However, he stated that this trend began some time ago and has since stabilized. Kang compared it to overpriced tech shares and questioned the sustainability of today’s Ethereum price.
Furthermore, the recent increase in spot Ether ETF authorization speed could potentially reduce the time issuers spend marketing their new product to potential institutional buyers. Moreover, Kang brought attention to a noteworthy drawback of these planned ETFs: no staking options, which may prevent a person from swapping their spot Ether to the ETF.
Due to these enhancements, a number of prominent asset management firms, including VanEck, BlackRock, Grayscale, Invesco Galaxy Digital, and Fidelity, have resubmitted their applications to the SEC for the creation of Ethereum-based ETFs.
Interestingly, VanEck has announced an attractive management fee of 0.20% for its Ethereum fund, which is rather reasonable compared to competitors. This rate is quite similar to Franklin Templeton, whose fee stands at 0.19%.
On the other hand, BlackRock has not released details of the fees that it charges for the iShares Ethereum Trust (ETHA), and this might cause pressure from other industry players to keep the costs at or below 0.30%, as suggested by Balchunas.
These advancements represent a watershed moment for Ethereum and the broader crypto market, which is experiencing new regulatory environments and fluctuating market sentiment. Ethereum’s integration into ETFs can change its market orientation and influence its importance in international investors’ strategies.
