With U.S. spot Ethereum (ETH) ETFs now a realistic prospect, some experts are questioning whether their approval will impact the market as much as a Bitcoin (BTC) equivalent.
Bitwise – the world’s largest crypto index fund manager – says they won’t be. In conversation with CryptoPotato, the firm’s analyst Juan Leon explained why.
Ignorance Of Ethereum
According to Leon, while many institutional investors have grown more informed and receptive to BTC as an investment asset, most still don’t understand what makes its flashier younger sibling any different.
“Even investors who can differentiate between both have a hard time thinking about their place in a portfolio,” wrote Leon in an email to CryptoPotato. “Advisors find it helpful when we explain that BTC can be contemplated as an allocation similar to gold and ETH as an allocation similar to a high-growth tech stock.”
Bitwise chief investment officer Matt Hougan named this as one of two reasons that ETFs will influence the price of Bitcoin more strongly than Ether. “BTC is likely to be first and suck up most of the oxygen,” he wrote to X on Thursday.
Hougan added that Bitcoin’s utility is also better aligned with what an ETF actually offers.
“Bitcoin’s killer app today is a way to store wealth outside of the fiat system,” he said. “Ethereum’s killer app is its functionality, and the ETF doesn’t impact that.”
Ethereum is widely viewed as more programmable than Bitcoin, allowing the network to host more complex applications such as decentralized exchanges and lending services. ETH has often been called the “digital oil” that powers that network since the asset is required to execute transactions.
Ethereum’s Long Term Interest
To the degree that financial advisors do understand ETH, Leon claims they see its merits – particularly for staking, which gives it “dividend-like” cash flows that BTC doesn’t have.
“They’re also beginning to understand BTC’s main role as a store of value vs ETH’s role as a smart-contract platform powering the most robust “decentralized app store,” he said.
While acknowledging the lackluster inflows to Ethereum-based funds this year, the analyst believes institutional interest in ETH will grow in the long run, and that the quiet surrounding it right now is only temporary.
Low inflows to October’s Ethereum futures ETFs, for example, were due to historically low crypto volumes across the board at the time of launch, combined with how mainstream media was distracted by Sam Bankman-Fried’s trial at the time.
“Until recently, most investors I’d spoken to this year had no idea crypto had rebounded and BTC is the best-performing asset in the world year-to-date,” said Leon. “Keep in mind, most advisors are still not allocated to crypto (waiting for an ETF) so they don’t get paid to follow what’s going on in crypto (yet)”
Bitwise is one of roughly a dozen asset managers including BlackRock and Fidelity racing to have a Bitcoin spot ETF approved by regulators.