Spot Ether (ETH) exchange-traded funds (ETFs) are unlikely to experience the same level of initial inflow as spot Bitcoin ETFs due to the difficulty in valuing Ethereum’s use cases, according to a warning from an industry executive. On the opening day of trading, spot Bitcoin ETFs saw $655.2 million of inflows, surpassing industry expectations. Stephen Richardson, managing director of financial markets at Fireblocks, explained that while Bitcoin offers a steady store of value, Ethereum’s technology-driven investment use cases have less clear metrics for valuation. Therefore, the initial inflows for Ether ETFs are expected to be lower. Bitwise’s BITB product saw the highest inflows on the first day, followed by Fidelity’s FBTC and BlackRock’s IBIT.
Richardson suggested evaluating Ether by looking at total value locked, a metric already used for valuing Ethereum and layer-2 blockchains. However, he expressed the need for additional metrics. VanEck, one of the approved spot Ether ETF applicants, proposed using transaction volume, the number of users, and validators to assess Ethereum adoption and utilization. Richardson stated that Ethereum is the “best bet” for dominating the digital native space and attracting more retail and institutional investors on-chain.
Markus Thielen, head of research at 10x Research, described Ethereum as a “network empowering the future of finance.” However, he noted that Ethereum’s revenue is relatively small compared to its market capitalization, making it an uncertain investment in terms of cash flow. Thielen also mentioned that Ethereum’s staking yields are lower than United States Treasury yields.
The U.S. Securities and Exchange Commission (SEC) recently approved spot Ether ETF applications from various companies. However, these ETFs cannot start trading until the SEC signs off on their Form S-1 filings. Bloomberg ETF analysts Eric Balchunas and James Seyffart anticipate that the spot Ether ETFs will capture between 10% and 20% of the flows seen by spot Bitcoin ETFs.
Since their launch, spot Bitcoin ETFs have attracted $13.8 billion in net inflows, according to Farside Investors. If spot Ether ETFs capture 15% of that, it would still amount to a combined $2.07 billion over the same period, which is considered impressive within the industry.
Overall, the SEC is facing a challenging battle against the legal firepower of the crypto industry, similar to the clash between Godzilla and Kong.