With a US spot Ethereum (ETH) ETF now a realistic possibility, some experts are questioning whether their approval will impact the market as much as Bitcoin (BTC).
Bitwise – the world’s largest crypto index fund manager – says they won’t do so. In conversation with CryptoPotato, the firm’s analyst Juan Leon explained why.
Ignorance of Ethereum
According to Lyon, while many institutional investors have become more aware and receptive to BTC as an investment asset, most still do not understand what makes its attractive younger sibling different.
“Even investors who can distinguish between the two have difficulty thinking about their place in a portfolio,” Lyons wrote in an email to CryptoPotato. “Advisers find it helpful when we explain that BTC can be thought of as an allocation similar to gold and ETH as an allocation similar to high-growth tech stocks.”
Matt Haugen, chief investment officer at Bitwise, cited this as one of two reasons why an ETF would impact the price of bitcoin more strongly than that of ether. “BTC is likely to be first and soak up most of the oxygen,” he said wrote Till X on Thursday.
Haugan said Bitcoin’s utility also better matches up with the ETF’s actual offering.
“Bitcoin’s killer app today is a way to store wealth outside the fiat system,” he said. “Ethereum’s killer app is its functionality, and ETFs don’t impact that.”
Ethereum is widely considered to be more programmable than Bitcoin, allowing the network to host more complex applications such as decentralized exchanges and lending services. ETH is often called the “digital oil” that powers the network because the asset is required to execute transactions.
Ethereum’s long-term interest
To the extent that financial advisors understand ETH, Lyon claims he sees its merits – particularly for staking, which gives it a “dividend-like” cash flow that BTC does not have.
“They are also beginning to understand BTC’s core role as a store of value versus ETH’s role as a smart-contract platform powering the most robust “decentralized app stores,” he said.
While acknowledging the low inflows into Ethereum-based funds this year, the analyst believes institutional interest in ETH will increase in the long run, and the calm around it right now is only temporary.
For example, the low inflows into October’s Ethereum futures ETF were due to historically low crypto volumes across the board at launch, given how the mainstream media was distracted by the Sam Bankman-Fried trial at the time.
“Until now, most of the investors I talked to this year had no idea that crypto has boomed and that BTC has been the best-performing asset in the world this year,” Lyons said. “Keep in mind, most advisors are still not allocated to crypto (waiting for the ETF), so they don’t get paid to follow what’s going on in crypto (yet)”
Bitwise is one of about a dozen asset managers including BlackRock and Fidelity in the race to get a bitcoin spot ETF approved by regulators.
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