Ethereum Spot ETF Officially Listed for Trading: Limited Short-Term Impact, Significant Long-Term Implications

On July 23, 2024, the United States Ethereum Spot ETF officially launched trading, coinciding with the 10th anniversary of Ethereum's first public sale. This event holds significant importance for the sustainable development of the crypto world, marking a key step for POS public chains into the mainstream financial world, which will attract more developers to join the Ethereum ecosystem construction. It also paves the way for other infrastructures like Solana to enter the mainstream world, promoting the popularization process of the blockchain ecosystem.

However, due to regulatory reasons, the Ethereum ETF is currently not allowed to stake, and investors will not be able to obtain staking mining returns of 3% to 5%. Additionally, the public's understanding of Ethereum has a high threshold, so the short-term impact of this ETF listing on the price of Ether may not be as significant as the impact of the Bitcoin Spot ETF on BTC prices, but it is expected to improve the stability of Ether prices and reduce volatility.

Short-term Impact Analysis: The power of both buyers and sellers is not as strong as Bitcoin ETF

Similar to the Bitcoin Spot ETF, the daily net inflow of the Ethereum Spot ETF will be the most important observation indicator. However, there are two main differences:

1. On the selling side: Grayscale Ethereum Trust ( ETHE ) is converting to an ETF, and in the process, 10% of the net assets will be split off to establish a low-fee Grayscale Ethereum Mini Trust ( ETH ), which may reduce some selling pressure.

2. On the buying side: Due to the inability to obtain staking rewards and the public's lower awareness of Ethereum compared to Bitcoin, investors may be more inclined to allocate to Bitcoin ETF.

Sell Order Analysis

The $9.2 billion Grayscale ETHE has a significant management fee difference compared to its competitors, which will still lead to early relocation sell-offs, but the impact may be less than the outflows from GBTC. Grayscale's decision to split 10% of its net assets to establish a low-fee ETF has alleviated the outflow pressure caused by high fees to some extent. In addition, the discount of ETHE has already converged in advance, and the outflow pressure resulting from the closing of discount arbitrage positions is also expected to be less than that of GBTC.

Buy Order Analysis

For the average investor, the investment logic of Ethereum is relatively complex, with a dynamically complex supply calculation and a higher cognitive threshold. In contrast, the logic of Bitcoin is simple and easy to understand, aligning more with traditional investment frameworks. Public data shows that the attention towards Ethereum ETFs is significantly lower than that of Bitcoin ETFs, with Google search popularity being only about 1/5 of Bitcoin's.

There is basically no demand for Ethereum ETFs among investors in the crypto space, mainly due to the lack of a 3%-5% baseline staking yield. Regulations do not allow ETFs to obtain staking yields, making holding an ETF significantly less attractive than directly holding Ethereum Spot in terms of risk-free annual returns.

Long-term Impact Analysis: Paving the Way for Other Crypto Assets to Integrate into the Mainstream World

As the largest public chain currently, Ethereum's approval of its Spot ETF is an important step for public chains to integrate into the mainstream financial world. From the SEC's approval standards, Ethereum meets the requirements in terms of anti-manipulation, liquidity, and pricing transparency. This creates the possibility for other eligible crypto assets to enter the public investment landscape through Spot ETFs.

In the future, more crypto asset ETFs may be approved, such as Solana. This will help crypto assets further occupy the minds of traditional investors and accelerate development.

In summary, the short-term price impact of the Ethereum Spot ETF may be less than that of the Bitcoin ETF, but its long-term significance is substantial. It marks the convergence of the crypto ecosystem and the mainstream world, moving from separate developments towards integration. The cognitive differences during this process may become the core factors affecting cryptocurrency price fluctuations and creating investment opportunities in the next 1-2 years.

At the same time, mainstream financial assets are gradually entering the crypto world in the form of RWA tokens, promoting the efficient circulation of global financial assets. The Bitcoin ETF has opened the door to the integration of crypto and traditional finance, while the Ethereum ETF is the first step into this new world.