Why Ethereum ETFs May Not See the Same Success as Bitcoin ETFs

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Following the news of the approval of Ethereum spot ETFs, Bloomberg Intelligence ETF analyst Eric Balchunas has dampened expectations. Balchunas said he expects Ethereum ETFs to gather just 10-15% of the assets Bitcoin ETFs have accumulated.

A string of signs suggests Ethereum’s institutional interest is much weaker than Bitcoin’s. Researcher Noelle Acheson, former head of market insights for Genesis Global Trading, said the largest Ethereum futures ETF (EETH) only has 4% of the assets managed by the largest Bitcoin futures ETF (BITO). This signals a very different reception for Ethereum products.

When spot Bitcoin ETFs were approved in January, a large inflow of institutional investments was observed, sending the price of Bitcoin to new highs. According to analyst Hildobby, institutions bought over $12 billion worth of Bitcoin after ETF approvals. Investors in Ethereum may not get the same boost in interest.

Acheson points out that Ethereum’s regulatory status remains unclear. While Ethereum has been mentioned in court suits as a commodity, the SEC hasn’t clearly defined it, making investment in the asset even more complicated.

Balchunas and his colleague James Seyffart had earlier boosted the chance of a spot Ethereum ETF approval to 75% due to pro-crypto developments in the U.S. Balchunas, however, expects the launch of Ethereum ETFs to be disappointing compared to Bitcoin.

“When/if the ETH spot ETFs eventually launch, we should brace ourselves for a disappointing reception,” Acheson wrote in her newsletter, “Crypto is Macro.” Acheson attributed that to the traditionally lower institutional interest in Ethereum-based products in the U.S. and overseas.

In Hong Kong, Ethereum makes up less than 15% of the assets under management for spot ETFs; a similar trend whereby institutional interest has been largely subdued. The U.S. market, where investors already have access to Ethereum futures ETFs, shows a lack of enthusiasm as well.

“The [assets under management] of the leading ETH futures ETF (EETH) is about 4% that of the leading BTC futures ETF (BITO),” Acheson writes, highlighting the stark contrast in investor interest between the two largest cryptocurrencies.

Some voices within the industry remain optimistic about Ethereum’s future. Investor Jim Bianco suggests removing the regulatory uncertainty around Ethereum’s proof-of-stake might bring significant institutional investment.

“Remove the regulatory uncertainty around proof of stake and watch how Wall Street runs to ETH,” Bianco wrote on X. He highlighted that Ethereum is the broad utility in the crypto ecosystem, such as DeFi, NFTs, and Layer 2.

In a nutshell, while the approval of Ethereum spot ETFs marks a significant milestone in terms of regulation, the actual impact on institutional investment remains to be seen. Bloomberg Intelligence’s Eric Balchunas and other analysts warn that Ethereum might not be the Bitcoin-esque skyrocketing growth following its ETF approval. The broader implications for Ethereum and other altcoins will be clear as the market digests these new products.