Ether ETFs Unlikely to Cause a 'Bubble,' Traders Say

Ether (ETH) spot-exchange traded funds (ETFs) may increase institutional investment and power the world’s most-used blockchain, but is unlikely to create euphoric price surges, some market observers opined.

Interest in ether bets rose significantly after the approval of spot bitcoin (BTC) ETFs in January, which sparked hope among ether traders. Last week, Ethereum’s native token crossed the $3,000 mark for the first time since April 2022, rising 15% in a week and beating bitcoin’s relatively modest 8% rally in the same period.

Crypto circles on social application X expect such price action to continue after the expected issuance of ether ETFs later this year. The narrative is that these inflows could later find their way to the broader Ethereum ecosystem.

However, some believe an ETF could create sustained, rather than explosive, growth in the ether market.

“Ethereum ETFs won’t cause bubbles,” Jag Kooners, head of derivatives at Bitfinex, told CoinDesk in an email. “Despite concerns, institutional investment through an ETF could stabilize the Ethereum market, as seen with bitcoin and gold ETFs, fostering sustained growth.”

“Ethereum’s Layer 2 solutions enhance scalability by enabling faster, cheaper transactions outside the main blockchain, fostering growth,” he added. “Unlike bitcoin’s security focus, Ethereum’s L2 solutions prioritize rapid expansion, potentially attracting institutional investment and broadening application scope.”

However, an ether ETF still faces regulatory headwinds. “Ether’s classification as a security or commodity remains a key hurdle despite ongoing regulatory discussions,” Kooners said.

Some traditional finance firms say there is a 50% chance of an ether ETF approval by May, as reported, with ether considered the “only digital asset other than bitcoin” to get spot ETF approval in the U.S.

As of Friday, Franklin Templeton, BlackRock, Fidelity, Ark and 21Shares, Grayscale, VanEck, Invesco and Galaxy, and Hashdex have all submitted applications for an ether ETF.