Ethereum ETF: Three Advantages That Could Attract Wall Street’s Attention

Author: Brayden Lindrea, CoinTelegraph; Compiler: Tao Zhu, Golden Finance

Ethereum, the world's second-largest blockchain network, is expected to be the focus of the next spot cryptocurrency exchange-traded fund, but it may have a publicity problem.

While Ethereum has been described in the past as the "internet of money," "the world computer," and "digital oil," some worry that Ethereum is not well-publicized, and its highly technical roadmap may be difficult for Wall Street to grasp and could dampen demand for a spot Ethereum ETF.

Markus Thielen, head of research at 10x Research, noted that the best investor pitches should avoid technical jargon. Here's how Thielen and several commentators think Ethereum can be pitched.

The Future of Finance

Thielen said that Ethereum is easier for Wall Street investors to understand as "the network that empowers the future of finance."

Ethereum already has nearly all of the world’s largest decentralized finance protocols, tokenized real-world assets, and stablecoins.

However, Thielen noted that Ethereum has lost many users and recent network upgrades have been fairly slow, which could affect that narrative.

“While Ethereum’s staking yield is lower than Treasury yields, the fact that Ethereum generates a minuscule amount of revenue relative to its market cap does not make it a viable, cash-flow-generating investment.”

Integrated decentralized ecosystem platform

Henrik Andersson, chief investment officer at investment management firm Apollo Crypto, said that Ethereum could also be called a “decentralized as a service” platform, powering everything from finance to social networks to artificial intelligence.

Source: Eric Balchunas

In addition to decentralized financial applications, the Ethereum ecosystem also includes decentralized autonomous organizations, social networks and identity solutions.

Ethereum has more room to rise than Bitcoin

Andersson suggested that a simpler propaganda is that Ethereum is a cryptocurrency with more room to rise than Bitcoin.

“Others may simply view Ethereum as a smaller, faster-growing crypto asset,” he said.

Ethereum’s market cap is currently $453 billion, while Bitcoin’s market cap of $1.34 trillion is about three times that.

Andersson said others will be attracted by Ethereum’s potential price gains, and he is confident that Wall Street investors will not be bothered by Ethereum’s complex six-stage technical roadmap.

Regardless of the technology, Ethereum’s price relative to Bitcoin (BTC) has steadily fallen from $0.085 in December 2021 to $0.055 today.

This will make it more difficult to convince investors to buy Ethereum ETFs that are identical to Bitcoin investment products already on the market, explained CK Zheng, investment director at cryptocurrency hedge fund ZX Squared Capital.

ETH/BTC chart over the past 12 months. Source: Coingecko.

Zheng pointed to the Ethereum Foundation's investigation by the SEC and the rise of Solana as a competitor to Ethereum as two other factors that could hinder the performance of a spot Ethereum ETF.

Larry Fink believes it, so you should too

That being said, some of Wall Street's biggest firms have begun exploring use cases for Ethereum, with considerable success.

BlackRock (one of the approved spot ether ETF issuers) used Ethereum to tokenize its BlackRock USD Institutional Digital Liquidity Fund in March, which has amassed $470 million in assets.

BlackRock CEO Larry Fink said that every stock and bond will eventually be tokenized on the blockchain. 21Shares analysts said that if Fink's prediction comes true, Ethereum could benefit because it already accounts for 71.9% of all tokenized financial assets on the chain.

Source: Evanss6

The SEC approved VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy and Bitwise's 19b-4 applications on May 23 to issue spot Ethereum ETFs.

The approved parties must wait until the SEC approves their S-1 form filings before the ETFs can begin trading.

If that happens, Bloomberg ETF analyst James Seyffart expects the ETF to absorb 20% of the flows seen by spot bitcoin ETFs, with Balchunas’ estimate being smaller, between 10% and 15%.