Why Ethereum ETF’s First Day Inflows Are Not the Same as Bitcoin — Fireblocks MD

adminJune 3, 2024

Spot Ether (ETH) exchange-traded funds will not see the same first-day inflows as spot Bitcoin ETFs. That’s because the asset’s use cases are much more difficult to value, industry executives warned.

The spot Bitcoin ETF saw inflows of $655.2 million on the first day of trading on January 11, exceeding industry expectations at the time.

While Bitcoin offers a stable value use case, the metrics used to evaluate Ethereum’s technology-focused investment use case are much less clear, Stephen Richardson, managing director of financial markets at Fireblocks, told Cointelegraph.

“What’s missing is a broad consensus that effectively evaluates the usefulness or utilization of the Ethereum blockchain.”

“To be able to evaluate the adoption or utilization of a technology and derive its value, you must first create the right value metrics and drivers,” adds Richardson.

As a result, “we will not see the same level of inflows on day one in the Ether ETF as we saw in the Bitcoin ETF,” he concluded.

Bitwise’s BITB product saw the most inflows on its first day of launch, with its Bitcoin ETF at $237.9 million, followed by Fidelity’s FBTC ($227 million) and BlackRock’s IBIT ($111.7 million). . According to BitMEX Research data.

*Spot Bitcoin ETF flows from January 11 to March 9. Source: BitMEX Research.*

Discussing how to value Ethereum, Richardson suggested looking at Total Value Locked, a metric that can already be used to value Ethereum and the layer 2 blockchain on top of it. But Richardson hinted that he would like to see more.

VanEck, one of the recently approved spot Ether ETF applicants, recently proposed that Ethereum adoption and utilization could be assessed using trading volume, user and validator counts.

When asked what would be the strongest way to convince potential investors about an Ether ETF, Richardson said it was the “best way” for Ethereum to dominate the digital native space and connect more retail and institutional investors on-chain.

“Investors are betting on leveraging the software itself because the value of Ethereum is inherently tied to the use cases built on top of it.”

Last week, Markus Thielen, head of research at 10x Research, suggested that Ethereum could be introduced as “the network that powers the future of finance.”

However, Thielen said the revenue generated by Ethereum is “minor” compared to its $455 billion market capitalization. That doesn’t mean it’s a “viable, sufficiently cash-flow producing investment.”

Ethereum’s staking yields are also inferior to US Treasury yields, Thielen added.

Related: SEC’s ETF decision means ETH and ‘many’ other tokens are not securities.

On May 23, the SEC approved applications from VanEck, BlackRock, Fidelity, Grayscale, Bitwise, Franklin Templeton, ARK 21Shares, and Invesco Galaxy to issue 19b-4 spot ETFs.

Those approved must wait until the SEC approves their Form S-1 filing to begin trading ETFs.

If that happens, Bloomberg ETF analysts Eric Balchunas and James Seyffart expect the ETF to capture between 10% and 20% of the flows seen in spot Bitcoin ETFs.