Ethereum ETFs could be a game changer - turning big money investors into crypto converts

By Joel Kruger

With spot ether ETFs now trading in the U.S., regulation builds confidence among institutional buyers

There is more to crypto than bitcoin.

Cryptocurrency had a watershed moment at the beginning of 2024 when the first batch of spot bitcoin ETFs (BTCUSD) were approved for trading in the U.S. Now spot ethereum ETFs (ETHUSD) are about to become available to U.S. investors.

Spot ether ETFs are slated to begin U.S. market trading on July 23, pending regulatory approval. For comparison, spot bitcoin ETFs have seen noteworthy inflows since their debut, signaling investor interest. Moreover, with ether ETFs and other crypto products crossing regulatory hurdles and gaining approval, investors will see there is more to crypto than bitcoin.

Yet despite this major step forward for the crypto industry, a massive inflow of retail capital has yet to materialize. Instead, we're seeing gradual adoption, marked by cautious optimism rather than the frenzied excitement many predicted.

Institutional interest is the most important point of focus. While general inflows into spot bitcoin ETFs have cooled, market structure is coming together, and support from traditional financial giants is key. These entities are the best positioned to provide the necessary stability for retail investors while also providing additional counterparties for institutional adoption and growth.

One ongoing debate focuses on the idea that institutions may never significantly invest in crypto. Institutional inflows are somewhat deceptive in that they often get off to a slower, more cautious start before fully gearing up. This sentiment is short-sighted. Though allocations toward specific cryptocurrencies vary, it has been abundantly clear that financial institutions have been seriously exploring investments in blockchain, with specific initiatives from JPMorgan Chase (JPM), Bank of New York Mellon (BK) , Mastercard (MA), Goldman Sachs (GS) and Block (SQ), among others, to develop varying capabilities supporting this technology and the digital-assets ecosystem.

The merits of this technology from both an investment and operational perspective have been quietly pursued by some of the world's biggest names in finance for several years already. When thinking about practical deployments of applications that connect traditional finance and crypto, including custody, lending, asset management and brokerage, banks are especially well-positioned.

Whether through allocations toward crypto ETFs, direct investment in digital assets, participation in mining pools or support for blockchain development, institutional participation will grow. This will, in turn, drive significant price appreciation and stability for top coins such as bitcoin and ethereum.

Bitcoin and ethereum ETF trading will bring necessary price support and attract further participants across the financial ecosystem worldwide, fueling fundamental value increases in mainstream crypto assets.

Even more importantly, spot bitcoin ETFs and now spot ethereum ETFs are part of the foundational fabric that will propel the development of a more robust and diverse global marketplace for digital assets.

Regulators get on board

Signs of this maturation process and, as a byproduct, institutional acceptance are evident. In Asia, for example, Hong Kong has started trading spot bitcoin and ethereum ETFs, a trend that will spread to regional financial hubs such as South Korea, Japan and Singapore. In Europe, the UK's Financial Conduct Authority recently approved the launch of trading cryptocurrency price-tracking exchange-traded products.

It's also important to acknowledge the role of the development community and how the financial sector will continue to look to them to enhance the overall security of the network, improve scalability, encourage collaboration, and amplify efforts to educate the public.

The other critical piece has been the progression of regulatory clarity. The approval of bitcoin and ether ETFs signals to the industry that regulators better understand how to govern this evolving asset class. This allows institutional and individual investors to invest with greater confidence in a market that has historically been known for volatility and speculation.

The integration of cryptocurrencies into mainstream finance through these ETFs will likely be a pivotal chapter in the evolution of digital assets. While spot bitcoin ETF approval did not spark the immediate revolution some enthusiasts hope for, and we've yet to see investors' direct response to ethereum ETFs, the crypto industry as a whole is making significant strides, setting the stage for a future where crypto is as ubiquitous and regulated as any other major asset class.

Joel Kruger is digital market strategist at cryptocurrency exchange LMAX Digital.

Also read: Ethereum ETFs are here. What you need to know before trading.

More: Ether could jump 90% following ETF approvals, even if the funds lack popularity of bitcoin

-Joel Kruger

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