Ethereum ETF Trading May Reshape The ETH Ecosystem, Galaxy Research Report Suggests

The cryptocurrency market is bracing for a potential influx of new investment as Ethereum ETH/USD spot exchange-traded funds (ETFs) near trading launch in the United States.

The cryptocurrency market is bracing for a potential influx of new investment as Ethereum (ETH) spot exchange-traded funds (ETFs) near trading launch in the United States.

A new report by Galaxy Research suggests these new financial products could attract substantial capital, potentially reshaping the Ethereum ecosystem, according to Coindesk.

“We expect the net inflows into ETH ETFs to be 20-50% of the net inflows into BTC ETFs over the first five months, with 30% as our target, implying $1 billion/month of net inflows,” Galaxy analyst Charles Yu said in the report, referring to the Bitcoin (BTC) ETFs that launched earlier this year.

This projection bodes well for Ethereum ETFs, indicating a strong anticipated demand once they become available to U.S. investors.

The path to Ethereum ETF trading has been cleared following the Securities and Exchange Commission’s (SEC) approval of applicant filings last month.

However, the final hurdle remains the approval of S-1 filings, which is necessary before these products can begin trading.

Galaxy's report also draws parallels between the expected demand for Ethereum ETFs and the successful launch of Bitcoin spot ETFs in January.

The research suggests that independent investment advisors and broker/dealer platforms will likely drive new demand for these Ethereum-based products.

Interestingly, the report highlights Ethereum's unique market dynamics, suggesting it may be more sensitive to ETF inflows than Bitcoin.

This sensitivity is attributed to the significant portion of ETH supply locked in staking, bridges, and smart contracts, coupled with lower holdings on centralized exchanges.

However, Galaxy also notes potential challenges for Ethereum ETFs.

“Galaxy cautioned that spot Ethereum ETF demand may be limited due to the lack of staking rewards,” the report states, highlighting a key difference between holding ETH directly and through an ETF.

The conversion of the Grayscale Ethereum Trust (ETHE) into an ETF is also expected to influence market dynamics.

According to Galaxy, “these negative flows could be about 319,000 ETH per month or $1.1 billion.”

However, the report suggests that the impact may be less severe than what was observed with the Grayscale Bitcoin Trust (GBTC) conversion.

As the cryptocurrency market awaits the potential approval of Ether ETFs, which could come as soon as July 4 according to a recent Reuters report, investors and industry professionals are eager to understand the implications of these new investment vehicles.

For those seeking deeper insights into the future of Ethereum and the broader digital asset landscape, Benzinga's Future of Digital Assets event on Nov. 19 promises to be a crucial forum.

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