Crypto Executives Weigh In On Impact Of Ethereum Futures ETF

The heavily anticipated launch in the U.S. of exchange-traded funds (ETFs) linked to Ether (ETH) did not turn out as expected, and instead attracted modest investor interest. However, crypto businesses and executives are optimistic that the latest offering will have an impact on the broader cryptocurrency industry.

In a note sent to International Business Times by the research team of Bitrue, a cryptocurrency exchange and financial platform established by a group of blockchain enthusiasts, underlined that the launch would open opportunities to allow a massive inflow of institutional investment to Ethereum.

"The introduction of an Ethereum Futures ETF marks a pivotal juncture for crypto and the broader financial sector. We anticipate that this development will pave the way for a substantial inflow of institutional investment in Ethereum, providing a regulated and more accessible avenue for conventional investors to participate in the crypto arena," the Bitrue research team said.

Moreover, the team highlighted how this new product could help bring cryptocurrency to the mainstream and bring stability to the market valuation of ETH.

"This surge in institutional capital carries the potential to bring stability to Ethereum's market valuation and amplify overall market liquidity, albeit with the potential to invite regulatory scrutiny. As cryptocurrencies continue their trajectory toward mainstream acceptance, Ethereum Futures ETF stands as a significant milestone, further erasing the boundaries between conventional finance and digital assets. This ultimately broadens investment opportunities in the ever-evolving financial landscape," Bitrue research explained.

For Rachel Lin, co-founder and CEO of synthetic assets derivatives exchange SynFutures, the launch of ETH ETF, particularly that of BitWise, underlined the growing interest of institutional investors in the cryptocurrency industry.

"The recent announcement from Bitwise Asset Management regarding the launch of two Ethereum futures exchange-traded funds (ETFs) is a testament to the growing interest from institutional investors in the crypto space," Lin said in a note sent to IBT.

"Bitwise's move into Ethereum futures ETFs is just one of many signs that traditional financial companies are taking a keen interest in cryptocurrency derivatives. Major players like VanEck, ProShares, and Grayscale are also actively working on introducing their own Ethereum futures products," the CEO said, highlighting that "this trend highlights the maturation of the cryptocurrency market and underscores the fact that institutional players are increasingly looking to diversify their portfolios with digital assets."

Lin, who started her career in TradFi at Deutsche Bank in the global markets department, explained that "while spot ETFs hold the actual asset, futures ETFs use contracts to speculate on future asset prices. This distinction provides investors with a range of options and strategies to consider, opening the door to greater institutional adoption in the traditional finance sector."

For the crypto leader, the "launch of the Ethereum Futures ETF is undoubtedly a positive development as we eagerly await the Securities and Exchange Commission (SEC) to decide on spot Bitcoin ETF applications. The rejection of these applications earlier this year may have prompted the exploration of alternative structures such as futures-based ETFs. Nevertheless, it's essential to exercise caution in managing short-term expectations, given the inherent volatility of cryptocurrency markets and the continuously evolving regulatory landscape."

While others are optimistic about the launch of Ethereum Futures ETF, Bloomberg analysts noted that it could reduce market volatility but could also dampen the potential of Ether's performance, a trend that typically emerges as the asset class matures.

"It's not unusual for high volatility and performance to subside in a nascent asset class as it migrates into the mainstream," Bloomberg Intelligence's Mike McGlone and James Seyffart said in a research note this week.

"Bitcoin and Ethereum US futures and [ETF] launches may continue the trend of squashing volatility and marking price peaks, particularly in an unfavorable liquidity environment," the analysts added.

Meanwhile, analysts Vetle Lunde and Anders Helseth, in a market report released this week, called for pulling the brakes on ETH and advised the public to "rotate back into BTC," since the trading volume of Ether futures only accounted for 0.2% of ProShares Bitcoin Strategy ETF (BITO) made in its first day of trading n October 2021.

"The ETH futures ETF launch provides an important lesson for evaluating the impact of easier access to crypto investments for traditional investors: increased institutional access will only create buying pressure if significant unsatiated demand exists," Lunde said in the report.

ETH was trading down at $$1,635.10 as of 5:16 a.m. ET on Friday, with a 24-hour trading volume up by 114.95% at $5.31 billion – representing a 0.30% increase in the last 24 hours and a 2.1% loss over the past seven days.

ETH's circulating supply stands at 120,236,031 ETH, with its value down by 0.31% at a $19.66 billion market cap, data from CoinMarketCap showed.