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Exchange-traded fund investing directly in ether (ETH-USD), once cleared for trading, will likely attract slower demand than spot bitcoin (BTC-USD) ETFs, Bernstein said in a note early this week.
“ETH should not see as much spot ETH conversion due to the lack of an ETH staking feature in the ETF,” analyst Gautam Chhugani wrote to clients.
He added that the so-called basis trade could gradually find takers over time, which, in turn, should contribute to healthy ETF liquidity. The basis trade involves simultaneously buying the spot ETF and shorting the futures contract, holding both positions until their prices converge.
Spot ether (ETH-USD) ETFs are nearing final approval to begin trading in the U.S. after the Securities and Exchange Commission cleared prospective issuers’ key regulatory filings in May. Bitcoin-holding ETFs, meantime, have garnered robust inflows since debuting at the beginning of the year, fueling what was a strong rally in the underlying token.
The price of ether (ETH-USD) climbed 4.2% to $3.41K in late Tuesday morning trading, after sliding to as low as $3.25K in the prior session amid a wider crypto selloff. ETH is still down 3.7% over the past five trading sessions.