According to the predictions by Matt Hougan, the Chief Investment Officer at Bitwise, the Ethereum Exchange Traded Funds (ETFs) are all set to make huge profits by securing $15 billion by 2025.
The spiking interest in Ethereum as a profitable investment is the main reason behind such highly optimistic outlooks for the Ethereum ETFs.
Ethereum ETFs are currently valued at 26% of the total cryptocurrency market. The strong presence of ETH tokens in the market is recorded by the high market capitalization of the token at $414,051,536,506.
The launch of an ETF will strengthen the investor’s confidence in ETH and will in turn bring more sales for the token.
However, there are also certain limitations to the working of Ethereum ETFs that Matt Hougan lists to create awareness about the need to exercise utmost caution while investing in Ethereum ETFs.
The ETH tokens were slightly underperforming recently when compared to their high market capitalization. Hougan’s initial expectation was that Ethereum ETFs would earn $25 billion, but this constraint in its performance led Hougan to recalculate his estimations to a profit of $18 billion.
Unlike the Bitcoin ETFs, the Ethereum ETFs do not have an option for “carry trade”. Carry trade refers to earning huge profits by borrowing money in the denomination of a currency that has a low interest rate and converting and investing the money into another currency that provides a higher interest rate.
This absence of carry trade is due to an insufficient amount of staking prospects on the spot Ethereum ETFs from investors based in the United States. For this reason, Hougan further reduced his estimation of the amount of funds expected to be secured by Ethereum ETFs to $15 billion. Even though this amount is less than the originally estimated rate, it is still a good bid.
This prediction has increased the confidence of many other investors and many are considering investing in Ethereum ETFs in the hope that their projects will not be disapproved by the regulatory authorities.
What are Ethereum ETFs?
Ethereum ETFs are a new addition to the cryptocurrency market with the ruling by the US Securities and Exchange Commission (SEC) giving a green signal to the venture.
Ethereum ETFs are investment funds where investors can trust their ETH tokens as per the market trends. They do not have to buy the tokens themselves but can buy and sell the shares on stock exchanges.
ETFs provide the benefits of the traditional financial system besides the instability of the decentralized sector.
Spot ETFs and Futures ETFs are the two different ways in which Ethereum ETF trading is done in the market.
Spot ETFs
In the case of Spot ETFs, the investors base their trading decisions on the current price of ETH tokens. The value of the ETH holding will be affected by the price fluctuations of ETH tokens.
Futures ETFs
The futures ETFs do not directly hold ETH, but the investors can buy or sell ETH at a speculated price in the future. They do not have to incur the weight of owning ETH tokens.
Ethereum ETFs are highly advantageous for the investors. They can easily access ETH ETFs from ordinary stock exchanges. Investors can benefit from the regulatory measures of the traditional market to navigate any inconsistencies.
Ethereum ETFs are an easy method to ensure that a high liquidity volume is always maintained for the ETH tokens.
However, you should be aware of the risk factors associated with Ethereum ETFs to stay safe. The ETH tokens are highly susceptible to the market volatility of the prices.
If the future regulatory measures are against the goodwill of ETFs then your investments will be affected.
Ethereum ETFs are currently available on the following platforms.
- Bitwise Ethereum Strategy ETF
- VanEck Ethereum Strategy ETF
- Valkyrie Bitcoin and Ether Strategy ETF
- ProShares Ether Strategy ETF
- Ark 21 Shares Ethereum ETF
- Grayscale Ethereum Trust Conversion
- iShares Ethereum Trust
The Bottom Line
Despite the favorable predictions about the Ethereum ETFs, the current cycle is yet to reach peak sales. The ETH sales during the bullish period usually rise above $60 million, but it is yet to reach that mark at present.
However, the market has the potential to reach the estimated price as it is leaning towards the bullish side. So, there is a high probability that ETH will reach the predicted price with the ETH ETFs.
