Ethereum Spot ETF Launch: Limited Short-term Impact, Profound Long-term Significance

On July 23, 2024, the U.S. Ether Spot ETF officially began trading, coinciding with the 10th anniversary of Ethereum's initial public fundraising. Whether this date was carefully arranged or a coincidence, this event is of milestone significance, marking the official entry of POS public chains into the mainstream financial sector. This will attract more developers to join the Ethereum ecosystem construction and pave the way for other public chains like Solana to enter the mainstream market, which has substantial significance for the popularization of blockchain technology.

However, due to regulatory reasons, Ethereum ETF does not allow staking at present, and investors holding the ETF will receive 3%-5% less staking yield compared to directly holding Ethereum. Additionally, the understanding threshold for ordinary investors regarding Ethereum is relatively high, therefore the short-term impact of this ETF listing on the price of Ethereum may not be as significant as the impact on BTC price when the Bitcoin ETF was approved. In the long run, it mainly enhances the stability of Ethereum's price and reduces volatility.

Short-term impact: The strength of both buyers and sellers is not as strong as Bitcoin ETF, with limited impact on prices.

According to the tracking analysis of Bitcoin Spot ETF, the biggest impact on coin prices is the daily net inflow, which refers to the actual new buying/selling scale brought by the ETF to the crypto market. The redemption mechanism of the US Ethereum Spot ETF is the same as that of the Bitcoin ETF, both only support cash redemption, so the daily net inflow will also be the most important observation indicator. The main difference lies in:

1. On the selling side: Due to the difference in management fees, the fund migration effect of Grayscale Ethereum Trust ( ETHE ) still exists. However, unlike Bitcoin ETF, ETHE separates 10% of assets to establish a low-fee mini trust when converting to an ETF, which may slightly reduce selling pressure.

2. On the buying side: Since ETFs cannot earn staking rewards, holding an ETF will yield 3%-5% less annualized returns compared to directly holding Ethereum. At the same time, ordinary investors have a lower awareness of Ethereum compared to Bitcoin, and investors optimistic about cryptocurrencies may be more inclined to allocate to Bitcoin ETFs, which have clearer scarcity.

Long-term significance: Paving the way for other crypto assets to enter the mainstream market

Ethereum, as the largest public chain at present, obtaining approval for its Spot ETF is an important step for public chains to integrate into the mainstream financial system. From the perspective of SEC approval standards, Ethereum meets the requirements in terms of anti-manipulation, liquidity, and pricing transparency.

• Anti-manipulation: High node decentralization, ETF assets do not participate in staking, and there is a mature futures market providing hedging tools.
• Liquidity and pricing transparency: large market capitalization, sufficient daily trading volume, numerous exchanges listed.

In comparison, other public chains like Solana also meet these conditions to some extent. As the cryptocurrency derivatives market continues to diversify, it is likely that more cryptocurrency asset ETFs will be approved in the future, further attracting traditional investors and accelerating industry development.

In summary, the listing of the Ethereum Spot ETF has limited short-term impact on prices but significant long-term implications. It marks the gradual integration of the crypto ecosystem with traditional finance, where the cognitive differences between new and old participants may become a key factor influencing cryptocurrency price fluctuations and creating investment opportunities in the next 1-2 years. Meanwhile, traditional financial assets are also entering the crypto world in the form of RWA tokens, promoting the efficient circulation of global financial assets.

It can be said that the approval of the Bitcoin ETF has opened the door to the integration of cryptocurrency and traditional finance, and the Ethereum ETF is the first step through this door. In the future, we can expect to see more in-depth integration of crypto assets and traditional finance, together shaping a more open and efficient global financial system.