Ether Could Be the Next 'Institutional Darling,' Bernstein Says

The second-largest cryptocurrency is probably the only digital asset other than bitcoin likely to get spot ETF approval from the SEC, the report said.

AccessTimeIconFeb 19, 2024 at 8:44 a.m. UTC
Updated Mar 8, 2024 at 9:44 p.m. UTC
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  • Ether may be the only digital asset other than bitcoin to get spot ETF approval in the U.S.
  • There is a 50% chance of ETF approval by May.
  • Dencun, the Ethereum blockchain's upgrade due in March, will slash transaction costs.

Bitcoin's (BTC) recent rally has been driven by the spectacular introduction of exchange-traded funds (ETF). It may be time to now focus on ether (ETH), the second-largest cryptocurrency, broker Bernstein said in a research report on Monday.

Ether is "probably the only other digital asset likely to get a spot ETF approval by the SEC," the report said.

Bernstein says there is about a 50% chance of ether spot ETF approval by May and near-certain probability of approval in the next 12 months.

A number of traditional finance firms are vying for an ether ETF in the U.S., which is boosting the token's medium-term outlook. Franklin Templeton, Blackrock (BRK) and Fidelity, all of which had bitcoin ETFs approved by the Securities and Exchange Commission, are among firms that have submitted applications for an ether ETF.

"Ethereum with its staking yield dynamics, environmentally friendly design, and institutional utility to build new financial markets, is well positioned for mainstream institutional adoption," analysts Gautam Chhugani and Mahika Sapra wrote.

Ether yield markets would grow in lockstep with the crypto's market cap and could "power unique ETFs, if the staking yields are included in the ETF design," the authors wrote.

The broker notes that institutions don't just want to launch ether spot ETFs, they want to "build more transparent and open tokenized financial markets on the Ethereum network," adding that the "utility is beyond asset gathering."

Ethereum's next upgrade, Dencun, scheduled for March, "provides for a dedicated corridor and blockspace for roll ups, making transaction costs cheaper by another 50%-90%," the report said.

Edited by Sheldon Reback.


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Will Canny is CoinDesk's finance reporter.

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