Why Ethereum ETFs could boost the price of ETH in the coming weeks
The adoption of the Bitcoin spot ETF in the US may cause the price of ETH to rise on the markets, if Ethereum ETFs are approved, according to Coinhouse's scientific director Manuel Valente.
"The news had been eagerly awaited for several months," said the scientific director of the French investment platform Coinhouse. "The SEC (Securities Exchange Commission) authorised the creation of spot Bitcoin ETFs, in giving its approval to eleven companies that have proposed such a product, in particular the financial giants BlackRock,
Fidelity, VanEck, and Valkyrie, but also Grayscale," despite strong opposition from the commission's president. This incident is a turning point in the crypto ecosystem's growth, especially for American academic institutions.
A "barrier to entry" has been removed because of the Bitcoin ETF.
For a number of years, experts in the stock market have been intrigued by the cryptocurrency asset market, particularly by Bitcoin.
However, Manuel Valente points out that maintaining a software or hardware portfolio—which is very different from everything these players are used to—and complying with regulations have always made the conservation of these assets problematic. challenging to overcome.”
Therefore, there is a "significant barrier to entry" for these professionals to access products in the crypto market due to the emergence of an investment product in the form of an ETF that operates similarly to traditional financial products.
Best possible security for purchasers
Although they were based on futures contracts that "do not require maintaining an underlying in Bitcoin to ensure its solvency," Bitcoin exchange-traded funds (ETFs) had been available on the market for a number of years.
When compared to the underlying, this sort of fund's tracking error is its main drawback. Spot ETFs ensure the best possible security for investors by requiring the custody of a quantity of bitcoins equal to that of the relevant financial instrument.
Manuel Valente points out that "the ETF manager must purchase and hold an equivalent quantity of bitcoins" in order to preserve a 1:1 connection with the underlying.
"This naturally suggests that if there is a demand for this kind of product, prices should rise, particularly since ETFs are simple to incorporate into other conventional investment products like funds once they are made available."
robust demand and alluring commissions
“It is this theory that the market has subscribed to for several months, since Bitcoin is up 70% since mid-October,” observes the scientific director of Coinhouse.
It's the practice of purchasing rumours with the belief that the major financial players who have entered the race would be unable to deny them. In the past, the SEC has rejected just one of Blackrock's more than 700 requests for the formation of ETFs.
"It's possible that selling the news will have the opposite effect in the short term, with prices falling." But in the medium run, rising institutional demand ought to bring them back.
"The managers have announced very competitive commissions over the past few days, which suggests that they anticipate strong demand for their product."
Given that the next Bitcoin halving is less than a hundred days away, "which could create a multiplier effect," this increased demand is all the more predicted. Manuel Valente continues, "The Fed appears to have completed its restrictive policy and could loosen the purse strings, adding even more fuel to the machine."
ETH on the increase while we wait for Ethereum ETFs?
The Coinhouse expert highlights another factor to take into account, which not many analysts have brought up to date: spot Ethereum ETFs are also awaiting SEC approval and "may have the similar effects in terms of "growth in demand."
"Yet, in just a single year, the price of Ethereum has dropped by over 30% in comparison to Bitcoin, indicating that the market has not yet recognised the significance of this development."
According to Manuel Valente, the adoption of Ethereum ETFs might thus "reverse this trend and cause a sharp increase in the price of the asset in the weeks to come."
"To sum up, despite what some messages on social media suggest, there is no reason to fear that the financial industry is gaining control over the Bitcoin network."
According to Coinhouse's scientific director, the Bitcoin network is still run "in a completely decentralised manner, and no one can take control of it." "The opening of this market to new players through a classic financial tool, potentially attracting significant capital, but in no way allows them to influence the functioning of the computer network underlying" is what the introduction of spot Bitcoin ETFs signifies.