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

On July 23, 2024, the Ethereum Spot ETF officially began trading in the United States, coinciding with the 10th anniversary of Ethereum's first public sale. Whether this timing was intentional or a coincidence, it marks an important milestone in the development of the crypto world. This not only signifies the formal entry of POS public chains into the mainstream financial sector, but it will also attract more developers to join the Ethereum ecosystem, paving the way for other blockchain infrastructures to enter the traditional financial system, which has substantial implications for the popularization of blockchain technology.

However, due to regulatory restrictions, ETFs cannot participate in staking, and investors holding ETFs will be unable to obtain staking yields of 3%-5%. Additionally, the threshold for ordinary investors to understand Ethereum is relatively high, so it is expected that in the short term, the impact of ETFs on the price of Ethereum may not be as significant as the impact of Bitcoin ETFs on the price of BTC. The launch of ETFs has more so enhanced the stability of Ethereum's price and reduced volatility.

In the short term, the buying and selling power of Ethereum ETFs is not as strong as that of Bitcoin ETFs, and its impact on the market may be relatively limited:

1. On the selling side, Grayscale Ethereum Trust ( ETHE ) still has a significant management fee difference compared to other ETFs, which may lead to capital transfers. However, ETHE has preemptively split off 10% of its assets to establish a low-fee mini trust, which has alleviated potential selling pressure to some extent. In addition, the discount of ETHE has been basically eliminated, and the profit-taking motivation of arbitrage trades has also weakened.

2. In terms of buying interest, the awareness and consensus of retail investors regarding Ethereum is far less than that of Bitcoin. The supply mechanism of Ethereum is relatively complex and difficult to understand intuitively. In contrast, the fixed total supply of 21 million Bitcoin is more readily accepted. Google search data also shows that the popularity of Ethereum is only about one-fifth that of Bitcoin.

3. The demand for Ethereum ETFs among investors in the crypto space is limited. Since ETFs cannot obtain staking rewards, directly holding Ether tokens is more attractive.

In the long run, the approval of the Ethereum ETF is of significant importance:

1. As the largest public chain, the approval of the Ethereum ETF has paved the way for other crypto assets to integrate into the mainstream financial system.

2. Ethereum meets regulatory requirements in terms of anti-manipulation, liquidity, and pricing transparency, providing a reference for the approval of other crypto asset ETFs in the future.

3. With the launch of more cryptocurrency ETFs, it is expected to further enhance traditional investors' understanding and participation in the blockchain industry.

4. The crypto ecosystem and traditional finance are gradually moving towards integration, and the cognitive differences between new and old participants in this process may lead to price fluctuations and investment opportunities.

5. Mainstream financial assets are also gradually entering the blockchain world in the form of RWA(Real World Assets) tokens, promoting the efficient circulation of global financial assets.

Overall, the listing of the Ethereum ETF is an important step towards the integration of the crypto world with traditional finance. While the short-term impact may be limited, in the long run it will lay the foundation for the large-scale application and popularization of blockchain technology. Investors can closely monitor the fund flows and market reactions of the ETF to seize potential investment opportunities.