Ethereum ETFs — 3 pitches that could hook Wall Street

    30 May 2024

    Ethereum, the world’s second-largest blockchain network, is expected to be the focus of the next spot crypto exchange-traded fund, but it might have a sales pitch problem.

    While Ethereum has been described as “the internet of money,” a “world computer,” and “digital oil” in the past — some worry that Ethereum doesn’t have an elevator pitch, while its highly technical roadmap could be difficult for Wall Street to grasp and could subdue demand for spot Ether ETFs.

    Markus Thielen, head of research at 10x Research, told Cointelegraph that the best investor pitches should avoid technical jargon. Here’s how Thielen and several commentators believe Ethereum could be pitched.

    Future of finance

    Ethereum, as “the network empowering the future of finance,” is much easier to understand for Wall Street investors, according to Thielen.

    Ethereum is already home to nearly all of the world’s largest decentralized finance protocols, tokenized real-world assets and stablecoins.

    However, Thielen noted that Ethereum has lost many users, and recent network upgrades have come rather slowly, which could impact this narrative.

    “The fact that Ethereum generates minuscule revenues relative to its market capitalization does not make it a viable, sufficiently cash-flow-producing investment despite staking yields that are inferior to treasury yields.”

    All-in-one decentralization

    Alternatively, Ethereum could be pitched as a “decentralization of all kinds of services” platform powering everything from finance and social networks to AI, said Henrik Andersson, chief investment officer at investment management firm Apollo Crypto.

    Outside of decentralized finance applications, the Ethereum ecosystem includes decentralized autonomous organizations, social networks, and identity solutions.

    Faster growing Bitcoin

    Andersson suggests an even simpler pitch would be that Ether is a cryptocurrency with more upside compared to Bitcoin.

    “Others are likely to view Ethereum simply as a smaller and faster growing crypto asset,” he said.

    Ether’s market cap currently sits at $453 billion, making Bitcoin’s $1.34 trillion market cap roughly three times larger.

    Andersson said others would be attracted by Ether’s potential price upside, and he’s adamant that Wall Street investors won’t be fazed by Ethereum’s complicated six-stage technical roadmap.

    Technical or not, Ether’s price relative to Bitcoin (BTC) has declined steadily from 0.085 in December 2021 to 0.055 today.

    That will make it harder to convince investors to buy Ether ETFs with the same Bitcoin investment product already on the market, explained CK Zheng, investment chief at cryptocurrency hedge fund ZX Squared Capital.

    The Ethereum Foundation being investigated by the Securities and Exchange Commission and Solana’s rise to become an Ethereum competitor are two other tailwinds that could hinder the performance of the spot Ether ETFs, Zheng noted.

    Larry Fink believes in it, so you should too

    That said, some of Wall Street’s largest names have already begun exploring Ethereum’s use cases with considerable success.

    BlackRock — one of the approved spot Ether ETF issuers — used Ethereum to tokenize its BlackRock USD Institutional Digital Liquidity Fund in March, which has amassed $470 million in assets.

    BlackRock’s CEO Larry Fink has said every stock and bond would eventually be tokenized on a blockchain. Should Fink’s prediction come true, Ethereum could benefit as it already accounts for 71.9% of all tokenized financial assets on-chain, according to analysts at 21Shares.

    The SEC approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise to issue spot Ether ETFs on May 23.

    Those approved must wait until the SEC greenlights their Form S-1 filings for the ETFs to start trading.

    If that happens, Bloomberg ETF analyst James Seyffart expects the ETFs will take in 20% of the flows that spot Bitcoin ETFs have seen, with Balchunas making a smaller estimate in the 10% to 15% range.


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