Are Spot Ethereum ETFs as Successful as BTC ETFs?

Crypto spot trading was famous a few years ago but became accessible only recently when the SEC finally approved BTC ETF projects, triggering a massive flow of value into the market. Spot trading also became popular due to its numerous price benefits for investors, which is why many were eager to get these assets into their portfolios.

For instance, spot-based assets allow users to own their acquisition. At the same time, prices won’t be affected by fluctuations like regular cryptocurrencies. Therefore, if you want to learn how to purchase Ethereum, you should diversify your portfolio with ETH ETFs.

However, it’s hard to say which asset is best, Bitcoin or Ethereum, considering their multiple use cases and special features. At the same time, users are waiting for other cryptocurrencies to be used for spot ETF projects, so investors should prepare for the future of this sector.

Let’s do a brief comparison between Bitcoin and Ethereum spot ETFs.

The measurable success of spot BTC ETF

The BTC ETF’s success was mainly due to the right timing, as investors were already excited about Bitcoin’s halving at the beginning of the year. The SEC approved the first ten BTC ETF projects that had been on the waitlist for some time, and investors did their best to make them part of their portfolios.

The fact that so many were excited and willing to invest in them spiked up prices and made BTC ETFs one of the most valuable crypto-based assets at that moment. Unfortunately, their value dropped considerably after a few months, but the excitement wore out pretty quickly.

Still, we can say that BTC ETFs were great assets for investors, as they provided the following benefits:

• High accessibility as they offer exposure to the market without the need to purchase the asset;
• Regulatory benefits as the SEC approved them, meaning investors can comply with laws;
• Liquidity through market integration and access to mainstream financial ecosystems;
• Diversification since they provide something new to one’s portfolio;
• Tax benefits since the SEC approval can translate into tax efficiency eligibility;

What about Ethereum ETFs?

After the massive success of the BTC ETFs, Ethereum ETFs were the next to be regulated, although in a much smaller quantity than Bitcoin. The decision was understandable because the SEC is reluctant to use any cryptocurrency other than Bitcoin.

Still, it might have been among the reasons why Ethereum ETFs weren’t as popular as Bitcoin ones: investors weren’t convinced of their safety and profitability. In addition, factors like significant outflows and long position liquidations made these ETFs flop.

It might also be possible for investors to be less interested in Ethereum as an asset because it’s more of a tool for developers to create things like dApps, DAOs, and NFTs. Therefore, Ethereum is seen more as a cutting-edge technology through which the cryptocurrency world can advance.

At the same time, spot ETF assets can be dangerous.

Besides their numerous benefits, spot ETFs have their own challenges that can deter investor interest. For example, volatility is one of the trickiest issues to deal with since the ETF infrastructure cannot withstand it completely. Although they mitigate ownership and storage, ETFs are still exposed to price fluctuations.

At the same time, regulatory uncertainty continues as the law doesn’t cover all financial details about using these assets. This aspect has yet to improve as it’s defined by the government’s willingness to accept cryptocurrencies and blockchains, so investors have to wait some more.

Spot ETFs have also become targets for cybercriminals due to their considerable value and potential for more income. ETFs are indeed packed with multilayered security protection features, so they’re backed by encryption and cold storage options. However, cyber thefts are possible due to vulnerability breaches.

What about Futures ETFs?

Spot ETFs allow investors to own the underlying cryptocurrency directly but ensure easier and more accurate price tracking, as well as lower transactional fees. On the other hand, futures-based ETFs make it possible for investors to get the asset without owning the cryptocurrency but rather owning the futures contracts that follow its prices.

The futures contract is designed to offer investors the agreement to buy and sell the asset at a specific price and time in the future. Therefore, futures are less volatile since their investments are regulated by proper time. Their downsides are the tracking errors and higher transaction fees that must cover the futures contracts.

Spot ETFs can affect the market

Considering their newness on the market, spot ETFs have had an impact on the ecosystem more than the prices of cryptocurrencies. Therefore, they might contribute to market price changes since they mitigate for increased adoption. Spot ETFs have attracted massive investment inflows in only a few months, encouraging other types of investors to become interested in cryptocurrencies.

On the other hand, the approval of Bitcoin and Ethereum ETFs showed a tendency for crypto market validation. Considering the increasing number of crypto investors in the past years, it’s normal that adoption will happen at some point, and governments will start to use them as well.

Of course, the introduction of spot ETFs would trigger a surge in trading activity, which would offer a positive return to the market. Investors would be exposed to hedge funds and day traders, who would blend in with crypto trading.

Finally, spot ETFs are an important step into the future of cryptocurrencies since they pave the road toward new technologies. Since developers and teams are getting more creative over crypto assets, we are witnessing the construction of a new financial era in which new assets are flooding the market.

What do you think about spot ETF assets?

Spot ETFs became famous when the SEC approved a few Bitcoin-based projects at the beginning of the year, making them one of the most traded and appreciated assets for portfolio diversification. Ethereum ETFs followed closely, but their popularity was insignificant in comparison due to various market factors. Overall, spot ETFs are important for the crypto ecosystem as they mitigate technology and improve investments.