CashNews.co
Ether continues to grow but price levels remain subdued
When the SEC announced it had approved multiple spot ether ETF products in July 2024 market sentiment was almost universally supportive and encouraged by this action. Following years of stymying efforts by industry advocates and operators to create and trade spot ETFs, the two largest cryptocurrencies – bitcoin and ether – had received ETF approval within the same year. In stark contrast to the dramatic increase in price that bitcoin experienced, the majority of which has remined intact even as headline volatility has continued to increase, the price response to the ether ETF was muted. Even more interestingly the trading volumes and institutional appetite for these ETF products has also remained more lower than the spot bitcoin ETF and/or market forecasts.
Highlighting this sluggish beginning are the outflows that have been occurring from the ether ETF products, capped by a nearly $80 million outflow on a single Monday, which was the highest since a $98 million outflow figure in July 2024. While bitcoin has increased over 50% in 2024 (since the launch of spot ETF products), ether has only climbed approximately 15% and has yet to surpass the previous all-time-highs last achieved in 2021. From whichever metric is analyzed the launch of spot ether ETFs has fallen flat when compared to spot bitcoin ETFs.
Let’s take a look at a few of the reasons why, despite serving as the blockchain of choice for many Layer 2 applications, the ether ETF has gotten off to a slow start.
Bitcoin Is Synonymous With Crypto
Even though the cryptoasset space has expanded dramatically in just the last several years, the reality remains that in most media and institutional conversations, bitcoin is still the unquestioned leader. This can be observed either through anecdotally observing business media coverage and corporate announcements, and by watching the actions of TradFi institutions and nation-states alike.
Bitcoin ETFs have attracted billions in investment while sending the price of bitcoin up substantially, while corporate purchasers such as Microstrategy continue to focus on exclusively purchasing bitcoin. Larry Fink and Blackrock have issued public facing documents touting the appeal and upside of bitcoin, and nations such as El Salvador and more recently Bhutan have amassed stockpiles of bitcoin.
Bitcoin continues to dominate the crypto landscape, as well as the dollars that are being allocated by larger institutional investors.
Lack Of Narrative
As multi-faceted as the crypto landscape continues to be, the narrative and messaging around bitcoin has remained uniquely consistent since inception. From being labeled as digital gold, or a store or value, or the money of the future the narratives around bitcoin have remained steadfast. Even if the specifics of these narratives, or how well they manifest in the market, investors and regulators alike have become familiar with them to base decision making around these frameworks. This consistency has manifested itself even bitcoin is famously decentralized, has no identified creator, nor does the cryptocurrency have any sort of governing body.
Ether on the other hand, has seemingly struggled to find a message and/or narrative that is consistent enough, simple enough, or intuitive enough to be seized by mainstream investors. Even though the Ethereum blockchain and the ether token serves as the base layer for many of the enterprise applications that are driving the investment dollars into crypto, the presentation of Ethereum as the internet of the future or other amorphous value propositions have proven difficult for institutional investors to get behind.
Price Paradox
Last but certainly not least is the reality that, and directly connected to the primary value proposition of Ethereum and ether at large is the fact that ether is perhaps the token most susceptible to the crypto price paradox. Ether serves as the currency of choice for most of the Layer 2 applications that are driving enterprise adoption; stablecoins, DeFi, DAOs, and even NFTs all (for the most part) run and rely on ether. Even with improvements made via various upgrades – which have substantially increased capacity and reduced cost – the fact remains that pricing services in ether will have exercise downward pressure on a price-per-token basis.
Put simply any token, be it ether or otherwise, that simultaneously serves as a potential medium of exchange and investment asset (via spot ETFs), is going to need to obtain a medium satisfactory to both interested parties. Given the muted price action of ether following the approval and launch of spot ether ETFs, and the preference of institutions and governments to select bitcoin above other cryptoassets, and it appears that this paradox will continue to exercise influence for the foreseeable future.
Crypto ETFs have been a positive development for the sector, but not all such instruments deliver equally positive returns.