Can Ethereum Spot ETFs save the day?

If approved, could the Ethereum Spot ETFs be enough to push the crypto market higher?

Author

Justin
July 07, 2024

Hey everyone,

What a week in crypto!

Unfortunately the markets took a tumble. That doesn’t mean the crypto bull market is necessarily over just yet. Ultimately whether the bull market is over or not comes down to whether there is more cash / liquidity that will move into crypto to push the market higher again.

Last week, we had talked about how rate cuts could help move the market higher. This week let’s dive into the newly proposed Ethereum Spot ETFs.

The newly proposed Ethereum Spot ETFs would offer better price tracking, and likely lower fees than their currently available alternatives:

  • Ethereum futures ETFs - These ETFs imperfectly mimic the price of Ethereum by buying Ethereum futures and generally have larger fees than would be desirable

  • Grayscale Ethereum Trust (ETHE) - This is a trust that buys Ethereum. Often the price tracking to true Ethereum isn’t as accurate as would be desirable, and the fees are large as well

If approved by the SEC, can the Ethereum spot ETFs power the crypto market higher?

Potentially, but they may not offer enough new cash to power the whole crypto market higher on their own.

Gemini estimates that it could bring in ~$5bn of new capital into the crypto space in the first 6 months. Ethereum’s market cap is currently $356bn, so while $5bn would certainly help the crypto market move up / offset some bearishness, it may not be a panacea.

Which would bring us back to the key question…where is global liquidity headed because more is needed for the bull market to resume. For that, we need to anticipate or watch what the Fed / US Government and PBOC (Chinese central bank) do.

Cheers,

Justin

P.S. Initial sign of potential hope for the crypto bull market to continue…the US dollar just broke below this trend line. Creates the potential that it will continue lower. We should keep an eye on this.

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