Ethereum's Institutional Sell

New Best? Laser-eyed Bitcoiners have long-maintained that their chosen asset is the only cryptocurrency institutions will be willing to purchase. With spot ETH ETFs on the horizon, will TradFi soon find a superior alternative?

Bitcoin’s High Priest of HODLing, MicroStrategy founder Michael Saylor, had previously repudiated Ethereum on grounds that the Securities and Exchange Commission (SEC) would declare it – and by extension all non-BTC tokens – as crypto asset securities.

Unfortunately for Saylor, impending approval of spot ETH ETFs opens the door for future spot ETF listings on any crypto asset that meet the murky definition of a commodity, eliminating BTC’s monopoly on TradFi access and forcing it to compete amongst other crypto assets in the free market for capital.

While many conformed to beliefs that BTC will be the only digital asset to be accepted by the masses, Ethereum remains highly attractive to institutional players due to the usefulness of the network and the presence of similar properties.

Over half a dozen high profile financiers have lauded Ethereum and the use cases it enables, with numerous asset management firms launching their own tokenization experimentations to gain first hand experience with the Ethereum L1!

Assuming spot ETH ETFs receive approval tomorrow, TradFi institutions will finally receive the tools they need to monetize their support of Ether, potentially compelling them to increase their adoption of Ethereum-native blockchain technology and advertise Ether to external capital.

Daily trading volumes on existing commodity futures-based Ether ETFs set new all-time highs twice this week, generating $47.8M in volume on Tuesday, a 40% increase from the previous all-time high set just the day before and a 7x increase from last week’s peak volume day.

Ether futures ETF volumes may pale in comparison to the billions of dollars in daily volume processed by spot BTC ETFs, but they are not a distant cry from the volumes for BTC futures ETFs, which ranged around the $200M mark in recent weeks.

Although increases in ETH futures ETF volumes certainly appear impressive on a percentage-adjusted basis, it is worth noting that they have merely rebounded off depressed levels of just a few million dollars in daily volume.

Leading Bitcoin futures ETF BITO consistently processed over $500M in volume leading up to spot BTC ETF approval and achieved nearly $2B in volume one day prior to the main event; the chasm between BTC and ETH pre-spot ETF launch volume statistics makes it clear that TradFi participants are not speculating on the launch of spot ETH ETFs with the same amount of gusto as they exhibited for BTC’s spot debut.

Despite the relative lack of enthusiasm for Ether ahead of tomorrow’s first final spot ETF decision deadline, an overwhelming denial sentiment heading into this week could have made bulls weary of taking this trade…

Over $10B of ETH has been accumulated by the Grayscale Ethereum Trust (ETHE) and will become redeemable upon its conversion to a spot ETH ETF. Sell pressure from ETHE redemptions likely suppresses price in the near-term as it did for Bitcoin after GBTC unlocked in January, but many analysts remain bullish on the future trajectory of ETH price. 

Asset manager Bernstein claims that spot ETF approval will send Ether to $6.6k, meanwhile multinational bank Standard Chartered reiterated an $8k end-of-year target.