Will Ethereum become a capital game pursued by institutions?

Author: Jack Inabinet, Bankless; Translator: Baishui, Golden Finance

Eye-sighted Bitcoin holders have long insisted that their chosen asset is the only cryptocurrency that institutions are willing to buy. With the advent of the spot ETH ETF, will TradFi soon find a better alternative?

Long-time Bitcoin holder and MicroStrategy founder Michael Saylor previously refused to accept Ethereum on the grounds that the U.S. Securities and Exchange Commission (SEC) would declare it (and all non-BTC tokens) to be crypto-asset securities.

Unfortunately for Saylor, the imminent approval of the spot ETH ETF opens the door to the listing of spot ETFs for any crypto asset that meets the vague definition of a commodity in the future, eliminating BTC's monopoly on TradFi access and forcing it to compete with other crypto assets in the free market for capital.

While many believe Bitcoin will be the only digital asset to gain mass adoption, Ethereum remains highly attractive to institutional players due to the network’s utility and the existence of similar properties.

More than a half-dozen prominent financiers have praised Ethereum and the use cases it supports, and many asset managers have launched their own tokenization experiments to gain first-hand experience with Ethereum L1!

Assuming a spot ETH ETF is approved tomorrow, TradFi institutions will finally have the tools they need to monetize their support for Ethereum, which could force them to adopt Ethereum’s native blockchain technology more and evangelize Ethereum to outside capital.

Daily trading volume for existing commodity futures-based Ethereum ETFs hit all-time highs twice this week, with trading volume reaching $47.8 million on Tuesday, a 40% increase from the previous day's all-time high and a seven-fold increase from last week's peak.

Ethereum futures ETF volumes may pale in comparison to the trillions of dollars in daily trading volume processed by spot BTC ETFs, but they are not far off from BTC futures ETF volumes that have fluctuated around the $200 million mark in recent weeks.

While the growth in ETH futures ETF volumes is certainly impressive when adjusted for percentage, it’s worth noting that they’re only rebounding from dismal levels of just a few million dollars in daily volume.

The leading Bitcoin futures ETF, BITO, consistently handled over $500 million in volume prior to spot BTC ETF approval, and achieved nearly $2 billion in volume the day before the main event; The gap between BTC and ETH spot ETF pre-launch volume statistics clearly shows that TradFi participants are not as keen to speculate on the launch of the ETH spot ETF as they were on the BTC spot launch.

Despite the relative lack of enthusiasm for Ethereum ahead of tomorrow’s first final spot ETF decision deadline, the overwhelming denial heading into this week may have bulls weary of making this trade…

The Grayscale Ethereum Trust (ETHE) has accumulated over $10B in ETH and will be redeemable upon conversion to a spot ETH ETF. Selling pressure from ETHE redemptions could weigh on prices in the short term, much like it did for Bitcoin following the January unlock of GBTC, but many analysts remain bullish on the future trajectory of ETH prices. 

Asset manager Bernstein claims that spot ETF approval would push Ethereum prices to $6,600, while multinational bank Standard Chartered reiterated an $8,000 year-end target.