Spot exchange-traded funds (ETFs) for Ether (ETH), upon regulatory approval, are expected to attract demand similar to Bitcoin (BTC) ETFs, albeit on a smaller scale, according to a research report by broker Bernstein on Monday.
Bernstein analysts Gautam Chhugani and Mahika Sapra noted that Ether might not see substantial spot ETH conversions due to the absence of an ETH staking feature in the ETF. They explained that the basis trade, which involves buying the spot ETF and selling the futures contract concurrently, is likely to gain traction over time, contributing to healthy liquidity in the ETF market.
Following the Securities and Exchange Commission’s (SEC) approval of key regulatory filings from issuers last month, spot Ether ETFs are nearing availability for U.S. investors.
“ETH, as a primary tokenization platform, is establishing a strong use-case for both stablecoin payments and the tokenization of traditional assets and funds,” Chhugani and Sapra wrote.
The report also emphasized the need for a more robust regulatory framework for Ether and other digital assets. Bernstein anticipates an improved regulatory narrative around the U.S. elections later this year, especially as the likelihood of a Republican victory increases and given former President Trump’s pro-crypto stance.
Despite recent declines in crypto markets, the “structural adoption cycle remains intact,” the report added.
Meanwhile, JPMorgan noted in a report last month that spot Ether ETFs are expected to experience significantly lower demand than Bitcoin ETFs. The banking giant highlighted Bitcoin’s first-mover advantage and suggested that it could potentially saturate the overall demand for crypto exchange-traded funds.
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