Ethereum ETFs Struggle to Attract Investors Despite Addition of Staking Capabilities

Several U.S. exchange-traded funds (ETFs) tracking Ethereum began trading in November 2023, offering investors a convenient way to gain exposure to the second-largest cryptocurrency. However, these ETFs have faced weak performance and limited interest from investors so far.

Bloomberg ETF analyst Eric Balchunas discussed the challenges faced by ETH ETFs during an appearance on the New Era Finance Podcast with crypto analyst Michael van de Poppe.

Weak Performance Hinders Investor Flows

Balchunas pointed out that the ETH ETFs have struggled to gain traction, especially in comparison to Bitcoin ETFs, which have seen stronger performance and broader institutional participation. According to Balchunas, the core issue is Ethereum’s price struggles, which have limited institutional investor interest.

“I think people are getting a little tired of the narrative that it’s going to take a Bitcoin ETF to get institutional money flowing into crypto. Because if you look at the ETF performance, Bitcoin ETFs have performed quite well over the last year, with decent volume and trading activity. Whereas on the other side, we’ve seen these new ETH ETFs launch with weak performance and low interest from investors,” Balchunas stated.

While the addition of staking capabilities to ETH ETFs could provide some added value, Balchunas believes that it will not have a significant impact on investor inflows unless there is a sustained price rally.

“I think it will provide some added value to the product. But will it be a game-changer in terms of boosting demand for the ETF and get institutional investors flocking to it? No, I don’t think so. It really comes down to price performance. If we see several months of strong bullish momentum in Ethereum, then I think it will change the narrative and attract more interest from institutional investors,” he further explained.

Final Deadline for Staking Approval in ETH ETFs Is Set for the End of October

According to James Seyffart, an analyst at Futurist, the final deadline for approval of staking in ETH ETFs is the end of October. However, interim decisions could arrive by the end of May or August.

The first batch of U.S. ETH ETFs launched in November 2023, providing investors with a new avenue to invest in the cryptocurrency. At the time, the approval of futures-based Bitcoin ETFs in 2021 opened the door for the introduction of ETH ETFs, expanding the options available in the U.S. ETF market.

As of May 2024, there are seven ETH ETFs listed on the U.S. market, with more set to launch soon. These ETFs offer a convenient and accessible way for investors to diversify their portfolios with cryptocurrency exposure.

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