Markets have been reacting positively to both macroeconomic data indicating that the US Federal Reserve is increasingly likely to begin its rate cutting cycle in September and signs that Ethereum ETFs may be approved to start trading on 23rd July. Prospective issuers of Spot Ethereum ETFs including BlackRock, Fidelity, 21Shares, Grayscale, Bitwise and Invesco Galaxy have filed their final S-1 documents with the US Securities and Exchanges Commission outlining how much they would charge for their respective Ether ETFs. As noted by Bloomberg news, BlackRock said it would charge 0.25%, though it’s issuing a reduction for the first 12 months or $2.5 billion gathered in assets. Fidelity said it would also charge 0.25%, though it, too, is waiving it through the end of the year. The company didn’t impose a limit on assets. Crypto-native 21Shares and Bitwise are asking for 0.21% and 0.2%, respectively.
After much legal wrangling with the SEC, Ether is legally considered to be a commodity, but the corresponding ETFs will be securities. The question is now whether investors will react to these new ETFs the way they did with the introduction of Spot Bitcoin ETFs. These funds, which would hold Ethereum directly, could, according to a report from Citigroup issued last week, see inflows of between $4.7 billion to $5.4 billion in the six months after they debut. According to Cointelegraph.com there are three potential reasons for Ether to appreciate as noted by Bitwise chief investment officer Matt Hougan: 1. The widespread use of Ethereum-based applications compared to the “small amount of ETH” created daily 2. Approximately one-third of all ETH (28%) is staked and locked away 3. Ethereum staking is cheaper to produce as it does not require as much energy or high end computer chips and therefore miners don’t have to sell.
Bitcoin’s reaction to global and macro events
There has been ongoing inflows into US Bitcoin ETFs with data from Farside indicating that since US nonfarm payroll data came out on 5 July indicating that the labour market was cooling, inflows have continued on a daily basis. The Spot Bitcoin ETF products' cumulative total net inflow since their listings was $16.587 bn on 17 July, up from 14.8 billion on 18 June. Bitcoin itself has continued to rise, with a particular surge of over 10% following on from the assassination attempt against the former President and Republican Presidential nominee. He is seen as the more pro-crypto candidate, having hosted industry executives at his Mar-a-Lago residence, voiced enthusiasm for US-based bitcoin mining, and accepted crypto donations to his campaign.
The change in Bitcoin valuation and the impact on Spot Bitcoin ETFs is reflected in the holdings of EXANTE’s Professional and Institutional clients who saw a positive impact on the value of their holdings along with other global holders of Spot Bitcoin ETFs.
The rise in the value of Bitcoin, approximately 11% over the past 7 days, and the increasing inflows experienced by Bitcoin ETFs demonstrates that the quicker than global average adoption of these new assets by EXANTE’s Professional and Institutional clients and their continuing re-allocation of their holdings to this instrument has paid off. They remain positive about the further potential of Spot Bitcoin ETFs. They continue to move away from Bitcoin CFDs into these newer Spot Bitcoin ETF products, increasing their positions to 52.9% of new Spot Bitcoin ETFs by 16 June from 51.9% on 2 June. They also reduced their holdings of Bitcoin CFDs from 43.8% on 2 June to 42.7% by 16 June.
It seems that the rest of the world is catching up with the positivity around these new crypto assets that EXANTE Institutional Investors and Professional clients have shown since their initial approval in January.
Only time will tell if Spot Ethereum ETFs will super charge the price of Ethereum and possibly encourage the development of even more crypto ETFs. Much will likely depend on the growth trajectory of the US and global economy and the ability of the Fed and other globally important central banks to cut interest rates. If these rate cuts do go ahead, then we will likely see existing crypto ETFs become far more accepted as portfolio diversification tools.
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