Two research firms, Wintermute and Kaiko, are predicting that the demand for Ethereum ETFs may be lower than initially expected. Wintermute, a major market maker, forecasts that spot ether ETFs could attract a maximum of $4 billion in investor inflows over the next year. This projection falls short of the $4.5 billion to $6.5 billion range anticipated by most analysts. In comparison, bitcoin ETFs have amassed $17 billion in inflows within six months of trading in the U.S., making the projected amount for ether ETFs significantly lower.
Despite the lower predicted demand, Wintermute believes that the price of ether could increase by up to 24% over the next 12 months due to these inflows. The ETFs received final approval from regulators on Monday, allowing issuers like BlackRock, Fidelity, and Grayscale to launch and commence trading the funds on Tuesday.
However, U.S. regulators declined issuers’ request to allow ether ETFs to stake the crypto they own, which would have generated income to share with investors. Wintermute stated that this decision reduces the competitiveness of ETH ETFs compared to direct holdings, where investors could benefit from staking.
Kaiko, another research firm, shares a similar sentiment based on previous Ethereum-focused launches. According to Will Cai, head of indices at Kaiko, the launch of futures-based ETH ETFs in the U.S. last year saw underwhelming demand. All eyes are now on the spot ETFs’ launch with hopes for rapid asset accumulation. Cai also mentioned that the price of ether could be sensitive to inflow numbers in the initial trading days, regardless of the long-term trend.
Data tracked by Kaiko revealed a sharp increase in ether implied volatility over the weekend, with contracts expiring on July 26 experiencing a jump from 59% to 67%. This indicates decreased confidence in the ETH launch, as traders are willing to pay higher premiums to hedge their bets.
In terms of management fees, issuers disclosed their expected fees in filings last week. Grayscale’s Ethereum Trust plans to charge investors 2.5%, while other managers aim to keep fees in the 0.15% to 0.25% range.
The overall outlook from Wintermute and Kaiko suggests a potentially subdued debut for Ethereum ETFs in terms of investor interest and asset accumulation compared to bitcoin ETFs. However, market dynamics and investor sentiment could shift as trading begins and the ETFs gain traction in the market.