Bankless: Will a spot Ethereum ETF stimulate new ETH demand?

Original Title: “Will ETFs Drive New ETH Demand?”

Author: Jack Inabinet

Compiled by: BitpushNews Mary Liu

After a long and arduous approval process, spot Ethereum ETFs have finally been listed on traditional stock exchanges!

For years, the crypto community has eagerly awaited the launch of ETF products, hoping that their arrival would provide direct economic benefits to global asset management giants, thereby promoting Ethereum. If an unprecedented amount of capital flows into Ethereum, mainstream adoption and on-chain activity will follow.

Today, we will discuss the most watched indicators of Ethereum in the post-ETF era: the future direction of its price.

Looking Ahead

According to Yahoo Finance data compiled by The Block Pro Research, on the first day of trading for Ethereum ETFs on U.S. exchanges, the cumulative trading volume exceeded $1.019 billion.

Although the performance record of spot ETFs is still limited, many expect this product to have a positive effect on ETH, similar to that of BTC ETFs.

The spot BTC ETF has been one of the hottest financial products this year, attracting $18.6 billion in funds from Grayscale's GBTC and accumulating an additional $17 billion in assets under management.

A telling statistic illustrates the success of the spot BTC ETF: BlackRock's IBIT alone has seen inflows this year surpassing Invesco's retail-friendly QQQ Nasdaq 100 fund, ranking fourth among ETFs based on year-to-date inflows.

Despite the significant absolute dollar value of inflows into the spot BTC ETF, it is clear that there is limited inflow from net new buyer types such as pensions.

The spot BTC ETF aims to allow every mainstream financial institution to invest directly in cryptocurrencies, but institutional demand for these products has been relatively limited.

Only investment advisors (who allocate private capital that could have been used to buy BTC in other markets) and hedge funds (entities less likely to take directional BTC exposure) are significant buyers in non-isolated scenarios.

While the price of BTC in dollars has indeed risen since the ETF launch, it has not kept pace with the best-performing AI stocks on Wall Street, barely matching the stocks of established companies like General Electric, GoDaddy, Walmart, and Progressive Insurance.

Source: TradingView

The spot ETF has not “miraculously” driven new capital to purchase cryptocurrencies; rather, the inflows into the BTC ETF have been primarily driven by a strong risk appetite in the market. Unfortunately, even with this highly anticipated catalyst, BTC has failed to break through and maintain historical highs.

Given that BTC peaked four months ago and global economic data continues to soften, it is questionable whether broader market tailwinds can continue to support high-risk crypto assets.

Moreover, considering that existing mature investors have many ways to gain ETH exposure through TradFi using futures and trust-based products, it is unlikely that a large amount of capital is waiting off-market to purchase spot products with little differentiation.

Given all these factors, the same applies to ETH ETFs. There must be new investor demand for the price of ETH to rise.

A Milestone Worth Celebrating

The spot ETF is the ultimate catalyst for stimulating investor interest in ETH and the entire permissionless blockchain. However, with the final approval achieved and the excitement of investors about Ethereum's uncertain future gradually fading, critical reflection on Ethereum's current performance is needed.

Ethereum has reached a critical moment: it needs to accelerate adoption for the ecosystem to replace the traditional financial system. Fortunately, as issuers promote their products, and investors seek information about blockchains aimed at replacing traditional finance, ETF approvals will make Ethereum a focal point in the coming months.

While the mainstream has yet to explore hidden on-chain scenarios, financial giants like BlackRock CEO Larry Fink personally advocating for tokenization and the bullish case for Ethereum may stimulate non-crypto individuals to experience and understand blockchain technology.

Once the public recognizes the significant improvements of blockchain over traditional financial systems, as more individuals begin to store wealth in digital assets and utilize blockchain technology, on-chain usage will grow exponentially, positively impacting cryptocurrency prices and the fundamental bull market!

The overly simplistic narrative of Bitcoin as digital gold has failed to ignite mainstream enthusiasm for cryptocurrencies, pushing token valuations to historic highs. The emergence of bullish sentiment around Ethereum will drive a surge in on-chain usage and encourage investors to delve deeper into the industry.

ETFs provide TradFi giants with a reason to be excited about cryptocurrencies and offer Ethereum the best opportunity to be understood. However, if this time there is no impressive performance report, it could lead to the opposite outcome, potentially marking the beginning of Ethereum's decline and undermining the credibility of the entire crypto revolution narrative.