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The price of Ether (ETH) is expected to be highly “sensitive” to spot ETF inflows in the coming days, according to crypto analytics firm Kaiko. Investors will be closely monitoring the situation, especially considering the lackluster demand for futures products observed in late 2023.
Kaiko’s Head of Indexes, Will Cai, commented in a July 22 market report, “The launch of the futures-based ETH ETFs in the US late last year was met with underwhelming demand. All eyes are on the spot ETFs’ launch with high hopes for quick asset accumulation.”
While the full demand picture may take months to emerge, the ETH price could react significantly to initial inflow numbers. Several spot Ether ETFs received final approval on July 22 and are set to begin trading on July 23.
One potential price driver is the expected outflow from the Grayscale Ethereum Trust (ETHE), a fund that offers institutional investors exposure to ETH but enforces a six-month lock-up period on its shares. The conversion of ETHE to a spot ETF will enable easier trading, prompting many investors to cash out once trading begins.
Cai explained, “ETHE’s discount to net asset value closed over the past few weeks, after widening between February and May as hopes of approval waned. The narrowing discount suggests traders bought ETHE below par and will redeem these shares at NAV [net asset value] price on conversion to realize profits.”
Despite the significant impact of spot Bitcoin ETFs on the market, there is less optimism surrounding the popularity of Ether ETFs. Crypto market maker Wintermute expects Ethereum ETFs to generate between $3.2 billion and $4 billion in inflows during their first year of trading.
“Our view is the ETFs will likely see lower-than-anticipated demand, closer to $3.2 to $4 billion,” stated Wintermute in a July 21 research report. They predict that Bitcoin ETFs will accumulate roughly $32 billion in assets by the end of 2024, placing first-year inflows into ETH ETFs at around 10% to 12% of Bitcoin ETF flows. Consequently, Wintermute estimates that the price of ETH will increase by no more than 24% by the end of 2024.
Conversely, boutique crypto asset firm ASXN provided a more optimistic outlook. In a July 22 X post, ASXN forecasted an average monthly inflow of between $800 million and $1.2 billion into ETH ETFs. They also suggested that the price impact of ETHE outflows would be less dramatic than anticipated due to a tightening discount premium to net asset value and the launch of Grayscale’s mini ETH ETF.
“We are open to an upside surprise given the unique dynamics of ETHE trading at par prior to the launch and the introduction of the mini trust,” wrote ASXN.