Ethereum Spot ETF Is Coming, Should We Be Bullish or Bearish?

The market is bleak, but there is quite a lot of news about Ethereum. There are frequent good news surrounding the Ethereum Spot ETF. First, ConsenSys announced that the SEC had stopped investigating Ethereum Securities Issues. Later, market news said that the Ethereum Spot ETF is expected to be approved for launch on July 2. Standard Chartered Bank also joined in the fun, and it was recently rumored that it would build Bitcoin Trading platform for coins and Ethereum. Despite the numerous news, as most of it was expected, the market was still not good. As Bitcoin once fell below the $60,000 mark, Ethereum also returned to below $3,400. However, if we compare Ethereum which fell to 2900 due to lack of narrative at the end of May, and then compare the downward elasticity of mainstream currencies in the past week, we can see that spot ETF expectations still give ETH strong price support. Judging from the current node, the much-anticipated Ethereum spot ETF is about to be launched. The performance after listing has begun to become the focus of industry discussion. Whether it will be a rapid decline in reality, or whether it will turn the tide with the capital of institutions, the market is also very different about this. different perspectives. The trend of Ethereum this year can be described as twists and turns, but from the main narrative, it is nothing more than the Cancun upgrade and the hype of E Spot ETF. On March 13, the Cancun upgrade was completed, and ETH reached a maximum of 3,981 US dollars. Since then, with the news of ETF, the price has been falling all the way when the ETF was declared hopeless, and after the extreme reversal, it rose to 3,600 overnight. After that, it continued to fluctuate at high levels in conjunction with the broader market.

After the "618" dumping of goods, the crypto market once again entered a cooling-off period. Due to insufficient liquidity, prices are easily affected by emotions. Amid the recent outflow of ETF funds and the panic of Mentougou selling pressure, mainstream value coins have continued to slide. However, compared with Bitcoin’s drop from 65,000 to 7.72% in a week, Ethereum’s resilience is stronger (-3.18%), showing a relatively strong Supportive. Back to the market itself, in fact, there have been a lot of positive fundamental news about Ethereum recently. One is the clarification of non-security attributes. Consensys announced on social platforms last week that the U.S. Securities and Exchange Commission decided to end its 14-month investigation into Ethereum. While the lawsuit between the two surrounding ETH continues, this fact is undoubtedly a milestone for crypto regulation. Abandoning the Ethereum investigation means that the SEC will not later file charges that the sale of ETH is a securities transaction. This echoes the passage of Ethereum ETF 19b-4. The potential meaning of passing 19b-4 is to eliminate the securities attributes of Ethereum. . But before this news, there were still rumors that the US SEC would make a fuss about this. The reason is that the SEC chairman has repeatedly avoided talking about the properties of Ethereum, even after the ETF was approved. On the other hand, if Ethereum is no longer a security, then the POS mechanism and pledge mining in the mechanism will most likely not be securities. Ethereum spot ETF applicants are expected to add this function. Previously, due to the US SEC's aversion to pledges, all applicants deleted "pledge" from the S-1 form, which aroused market suspicion about the competitiveness of ETFs. For investors, without staking income and additional management fees, the rate of return is inevitably not as good as directly purchasing ETH. Of course, this speculation misses the consideration that under current U.S. regulations, large institutions such as banks are not allowed to directly purchase virtual currencies. The second biggest benefit is that the ETF time is approaching. Although the SEC chairman mentioned in an interview that he would announce the approval of the Ethereum spot ETF application this summer, the unspecified time point also made the market anxious. Just recently, the date finally had an estimated timetable. On June 21, Bloomberg ETF analyst Eric Balchunas announced on social media that the issuer of the Ethereum spot ETF is expected to submit a revised S-1 form later in the afternoon. Thereafter, the SEC will notify issuers of final modifications and validity, and the spot ETF is expected to be launched on July 2. Considering its previous accurate prediction of the listing of Bitcoin ETF and the reversal of Ethereum ETF, this time point has a certain degree of credibility. In addition, Standard Chartered Bank also announced that it is building a trading platform for Bitcoin and Ethereum. If the news is true, the trading channels will be further expanded and the investor threshold will continue to be lowered. However, judging from the current situation, traditional institutions still face major challenges in terms of regulatory feasibility and infrastructure if they want to engage in trading business. There are many good news, but the actual price performance can only be said to be unsatisfactory. There are also different opinions in the market about the upcoming ETF. In terms of market size, Bitcoin ETFs give an excellent sample. According to data from Farside Investors, since its launch in January, the net flow of BTC-related products has reached US$14 billion, and assets under management (AUM) have exceeded US$50 billion. However, the scale of the Ethereum ETF cannot help but cause concern. Most analysts believe that Ethereum can only account for 15-20% of Bitcoin's share. JPMorgan analysts believe that by the second half of 2024, the Ethereum ETF will only attract net inflows of approximately US$1 billion to US$3 billion. Andrew Kang, co-founder of Mechanism Capital, also holds a similar view. He wrote a detailed article analyzing the impact of Ethereum spot ETF on the market. In his view, excluding hedging transactions and spot rotation, the real net inflow of Bitcoin ETF is US$5 billion. According to Eric Balchunas's estimate, the flow of ETH may be 10% of BTC, which means that the real net purchase flow in the first 6 months after the adoption of the ETF may be US$500 million, and optimistic estimates are around US$1.5 billion.

He emphasized that the institutional market holdings of Ethereum itself are smaller than those of Bitcoin. Before the adoption of the ETF, Ethereum holdings in CME only accounted for 0.3% of the supply, while BTC accounted for 0.6% of the supply. However, before the ETF was launched, ETH has risen 4 times from its lows, while BTC has only risen 2.75 times, reflecting the limited upside of ETH. Second, from the perspective of quantitative data, Ethereum also performed poorly, with 30-day annualized revenue of US$1.5 billion, a price-to-earnings ratio as high as 300 times, and a negative price-to-earnings ratio after deducting inflation factors. The more realistic reason is that due to the emergency nature of the approval, the issuer did not spend a lot of time persuading holders to convert ETH into ETF form, and choosing ETF also bears the opportunity cost of ETH staking income. Andrew expects ETH to trade between $3,000 and $3,800 before the ETF is launched. After the ETF is launched, it is expected to be between US$2,400 and US$3,000. If BTC rises to $100,000 by the end of the fourth quarter/first quarter of 2025, it may drag down the rise of Ethereum and altcoins, and the ETH/BTC ratio will be lower, with the ratio in the next year between 0.035 and 0.06. There are bearish voices, and naturally there are also bullish ones. In response to Andrew Kang’s analysis, Degentrading counterattacked, believing that Ethereum may reach $6,000 by September. He emphasized that in discussions with traditional financial people, the market enthusiasm for ETH and even SOL is higher than BTC. At the same time, although Ethereum is about one-third the size of Bitcoin, its liquidity is only 10% of BTC. This means that an inflow of US$3-4 billion will have a substantial impact on ETH, and Grayscale’s ETH trust stock also gives Ethereum lower selling pressure than Bitcoin. A recent report from DeribitInsights also gave a bullish signal, with the ETH September 4000 call option buying volume premium exceeding $12 million, indicating rising market optimism in the mid-term. Regardless of the external controversy, ETF issuers have already sounded the drumbeat of a fee war. Last week, a number of spot Ethereum ETF issuers subsequently submitted revised S-1 forms. From a fee perspective, in order to seize the market, Ethereum’s fees are generally lower than Bitcoin’s. VanEck disclosed that its fees are low. To 0.20%, which is very close to Franklin’s 0.19%, in this context, other institutions such as BlackRock will be forced to keep fees below 30 basis points. Prior to this, Cathie Wood’s Ark Investment Management withdrew from the Ethereum ETF competition because it was not making money. She mentioned that the Bitcoin spot ETF did not earn any income for the company because the handling fee charged to investors was too low, with a rate of only 0.21%. While this is similar to the fees charged by other Bitcoin ETF issuers, it is still significantly lower than the fees charged by other non-cryptocurrency ETFs. In this context, allowing staking may add some competitiveness to the Ethereum ETF. Although there is currently no ETF issuer that has modified its standards to support staking, there is a high probability that the issuer will modify this in the face of profit pressure in the future. However, it is worth noting that if staking is used, for safety and efficiency reasons, the issuer may build its own node to become a verifier, which will dilute the market share of other Ethereum ecological projects. Back to Ethereum itself, as the largest application platform in the encryption field, the price of ETH actually represents the development of the entire encryption ecosystem. However, in recent years, as application and ecological development have entered a bottleneck period, the Ethereum hype cycle has begun to focus on upgrades. In addition to the vitality brought by staking, it also exists as a symbol of mainstream currencies. Compared with Bitcoin’s value consensus, Ethereum’s positioning in the eyes of institutions is quite ambiguous. On the one hand, it is a blue-chip stock among technology stocks and the absolute leader in the blockchain world, but on the other hand, it is also an easier investment product. The value of the replaced existence is not as strong as Bitcoin. Sometimes it even follows the decline but not the rise, and the increase is not as good as that of some US stocks. Especially in the current context of limited application innovation, the ecological growth of Ethereum has slowed down, and the MEME cycle has also rotated. From time to time, there will be arguments that Solana will surpass Ethereum. Although it is controversial whether Ethereum is a better investment product than Bitcoin in terms of investment value, no one will deny Ethereum's status and network effects. This is why the market pays close attention to the Ethereum ETF. Ethereum funds may flow into the altcoin market through pledge transmission, but Bitcoin funds will not. Looking at various price viewpoints, it is a high probability event that Ethereum will experience high volatility after passing the ETF. Pay attention to the fact that short-term bearishness and long-term bullishness are also in line with market price expectations. Before passing, various currencies in the ecosystem This kind of hype has already begun, and perhaps this is also one of the alternative ways to make money.

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