Spot Ethereum Exchange-Traded Funds are set to launch on July 23, after the SEC approved the rule change a couple of months ago. The introduction of these Exchange-Traded Funds (ETFs) is expected to impact the price of Ethereum (ETH), although the direction of this impact remains uncertain.
Will Cai, the head of indices at Kaiko, noted that the launch of futures-based ETH ETFs in the US last year did not generate significant demand. However, there are high expectations for the spot ETFs’ launch and the rapid accumulation of assets. It may take several months to get a full picture of the demand, but the initial inflows could influence the price of ETH in the early days.
Various companies such as BlackRock, Fidelity, Bitwise, VanEck, 21Shares, Invesco, Franklin Templeton, and Grayscale are preparing to start trading Ethereum ETFs on July 23.
Grayscale, a major player in the crypto space, plans to convert its ETHE trust into a spot ETF and introduce a mini trust seeded with $1 billion from the original fund. Despite competitive pressures, Grayscale will maintain a 2.5% fee for its ETHE ETF, which is higher than its competitors. Other issuers are expected to offer fee waivers to attract investors, with some waiving fees for up to a year or until assets reach certain thresholds.
The decision to keep fees high could potentially lead to ETF outflows for Grayscale, resulting in sell-off prices similar to the post-conversion performance of its GBTC. The narrowing of the ETHE discount to net asset value indicates that traders are interested in buying ETHE below par to redeem at net asset value post-conversion for profits.
The implied volatility for ETH has increased in recent weeks due to external events such as a failed assassination attempt on Donald Trump and President Joe Biden’s announcement that he will not run for president again. This heightened volatility, along with the anticipation of the ETF launch, has led to an increase in market sensitivity and potential price fluctuations based on the initial inflows.
Overall, the launch of spot Ethereum ETFs presents both opportunities and risks for investors, with the potential to impact the price of ETH in the short term. Traders and market participants will closely monitor the developments surrounding these ETFs to gauge the overall market sentiment and potential investment strategies in the coming months.
