The Ethereum price has been surprisingly strong despite the lack of development in terms of spot ETFs in the US. As I wrote a month ago, the outlook for spot Ether ETFs in the US remains bleak. Despite the negative future prospects across the pond, Ethereum has now received a helping hand from the East. A little over a week ago, three spot Ether ETFs were finally launched in Hong Kong, something that easily can turn out to have a positive ripple effect for Ethereum in other regions.
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Michael Saylor, one of the most prominent proponents of Bitcoin, stated last Thursday during a MicroStrategy conference that he also believes that the SEC will reject the pending applications for spot Ether ETFs in the United States. Saylor had the following to say: “Because it's increasingly clear that no other crypto token is going to achieve institutional acceptance this decade. Bitcoin is the only crypto that is going to cross the chasm. You could see the writing on the wall when the spot ETFs of Bitcoin was approved in January, by the end of May, you'll know that Ethereum is not going to be approved. And when Ethereum is not going to be approved, some time this summer it'll be very clear to everyone that Ethereum is deemed a crypto asset security, not a commodity. After that, you're gonna see that Ethereum, BNB, Solana, Ripple, Cardano, everything down the stack is just a crypto asset security unregistered. None of them will ever be wrapped by a spot ETF, none of them will be accepted by Wall Street, none of them will be accepted by mainstream institutional investors as crypto assets.”.
Saylor's claims coincide with the broad consensus in the market. It seems that the head of the SEC is determined that Ethereum is to be considered a security. The lukewarm news surrounding Ethereum ETFs is being pointed out by many as one of the reasons why Bitcoin has outclassed Ethereum (in terms of price action) this year. The most important factor for the positive contribution of the Bitcoin ETFs is of course the buying pressure the spot ETFs bring; the greater the flow of capital into the ETFs, the more Bitcoin the providers of the ETFs have to acquire. Another element is of course the publicity these ETFs bring with them. If we take a closer look at the price of Bitcoin (English / Swedish) and Ethereum, the numbers speak for themselves. From January 1st of this year until today, the price of Bitcoin has increased by about 49%, and at its peak, Bitcoin was up about 74% during the year. In the same period, the price of Ethereum has increased by about 33%, and at its highest, the price was up by as much as 78%.
Nevertheless, Ethereum has recently made astounding progress in regards to spot ETFs - and that in Hong Kong. There are now a total of three spot ETH ETFs and three spot BTC ETFs available on the Hong Kong exchange, and the thing to note is that all the ETFs are structured in a different and possibly more exciting way. The ETFs are set up with a standard "cash creates", but also an "in-kind" transaction model, which means that investors can buy shares in the ETFs with the underlying to what the ETFs gives exposure to. In the case of the Ethereum ETFs, this means that investors can both buy and sell shares with settlement in Ethereum instead of fiat if desired.
Despite the fact that this is good news for Ethereum, the reception of the ETFs has been so-so. Of the three ETF providers, Bosera, AMC and Harvest, only Bosera's ETF has had a net inflow of funds according to Farside. The inflow to the Bosera ETH ETF as of the 9th of May amounted to $8.1 million, while AMC has had $2.2 million in outflows and for Harvest the figure is $1.6 million in outflows. It is important to mention that the ETH spot ETFs in Hong Kong had about $44.9 million in total in seed/start-up funding, which might as well have constituted and counted as direct flow, which was the case when the spot ETFs in the US were launched. The capital market in Hong Kong is also of course only a small fraction of the capital market in the US. Going forward, the big question will be whether or not spot ETH ETFs ever will become a reality in the US.
This text is intended to inform and is not an investment recommendation.
Best regards,
Adam Jakobsen.
NBX.
