According to a report by CoinDesk, JPMorgan stated in a research report on Thursday that the demand for Ether spot ETFs will be much lower than similar Bitcoin fund products for various reasons. Analyst Nikolaos Panigirtzoglou, who leads JPMorgan’s analysis team, wrote:
The US Securities and Exchange Commission (SEC) approved the 19b-4 proposal related to Ether spot ETFs last week. However, investors still need to wait for the S-1 registration statement submitted by the fund issuer to be approved before trading such fund products can begin. The Block reported on Thursday, citing two sources, that the SEC has requested Ether spot ETF issuers to submit their S-1 draft documents by Friday, and Bloomberg analysts expect a listing by the end of June to be a reasonable possibility.
The absence of a collateral mechanism will reduce the attractiveness of Ether spot ETFs. JPMorgan also expects that Ether spot ETFs will attract up to $3 billion in net capital inflows for the remaining of this year, but the investment bank stated that if such products are allowed to be pledged, this number could rise to $6 billion.
The report pointed out that the Bitcoin halving in April this year was an additional catalyst for the demand for Bitcoin spot ETFs, while Ether will not have a similar driving force in the future. The investment bank stated that the lack of a collateral mechanism for approved Ether spot ETFs, compared with other platforms that offer yield on collateral, will also reduce the attractiveness of such products.
The author wrote that Ether, as an application token, “has a different value proposition to investors than Bitcoin, which competes with gold in portfolio allocation and has broader appeal.”
JPMorgan also pointed out that lower liquidity and lower assets under management (AUM) will make Ether spot ETFs less attractive to institutional investors compared to their larger competitors.
There may be a $1 billion outflow from the Grayscale Ethereum Trust
The initial market reaction to the launch of Ether spot ETFs may be negative, as speculative investors who bought into the Grayscale Ethereum Trust (ETHE) in anticipation of its conversion to an ETF may take profits. The report stated that ETHE may experience a $1 billion outflow, putting downward pressure on the price of Ether.
According to a previous report by Zombit, cryptocurrency data provider Kaiko stated that if Grayscale’s ETHE follows a similar pattern to its Bitcoin Trust (GBTC) in the first month after conversion, it may experience a daily average outflow of $110 million.
Related report: “Market experts: Cancellation of collateral plan by Ether spot ETF issuers may reduce attractiveness of such funds”
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