The recent U.S. Securities and Exchange Commission (SEC) approval of spot Ethereum exchange-traded funds (ETFs) sent crypto prices higher.
According to JPMorgan, the price to Net Asset Value (NAV) gap for the Grayscale Ethereum Trust (ETHE) has nearly closed, but fluctuations are expected if the launch of spot Ethereum ETFs in the U.S. faces further delays.
While the SEC has approved the 19b-4 forms, the S-1 filings are still under review.
The approval of these ETFs, which appears to exclude staking features to ensure SEC approval, suggests that the SEC may view Ethereum as a commodity without staking.
JPMorgan analysts believe that the SEC is unlikely to approve ETFs for other tokens, which are considered more centralized and are viewed as securities, unless U.S. policymakers pass legislation treating most cryptocurrencies as commodities—a scenario deemed less likely before the U.S. election.
JPMorgan raised questions about the potential for investor inflows into the newly approved spot Ethereum ETFs. The bank anticipates that demand for these ETFs will be a fraction of what was seen for spot Bitcoin ETFs.
Reasons include Bitcoin's first-mover advantage, the lack of a demand catalyst similar to Bitcoin's halving, the initial exclusion of staking in the Ethereum ETFs, Ethereum's different value proposition as an application token, lower AUM/liquidity, and the relative size of the Ethereum market compared to Bitcoin.
The bank estimates that the spot Ethereum ETFs could attract modest net inflows of approximately $1 billion to $3 billion for the remainder of the year. Should staking be included in the future, potentially through legislative changes, inflows could increase to between $3 billion and $6 billion.
Finally, JPMorgan noted that the initial market reaction to the launch of spot Ethereum ETFs might be negative.
Drawing parallels to the post-launch reaction of spot Bitcoin ETFs in January of the previous year, the firm expects around $1 billion to exit the Grayscale Ethereum Trust as speculative investors who anticipated a conversion to an ETF may take profits, potentially leading to a short-term decline in Ethereum prices following the launch of the spot ETFs.
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