The crypto market is on the edge of a potential regulatory milestone: the imminent launch of spot Ethereum ETFs in the United States. Yet, as anticipation builds, skepticism is growing among major Wall Street institutions about whether Ethereum will see the same investor frenzy that propelled Bitcoin ETFs to record inflows.
While global asset managers like BlackRock and Fidelity await final approval from the U.S. Securities and Exchange Commission (SEC) to roll out Ethereum ETFs, analysts are already tempering expectations. According to JPMorgan, demand for Ethereum ETFs could be a fraction of what Bitcoin ETFs have achieved—raising serious questions about Ethereum’s price trajectory and long-term investment appeal.
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Bitcoin vs. Ethereum: A Tale of Two Narratives
One key reason behind the lukewarm forecast lies in market perception. Bitcoin has successfully cemented its narrative as “digital gold”—a store of value akin to gold, appealing to institutional investors seeking portfolio diversification and inflation hedges. This powerful branding helped fuel over $153 billion in global capital flows into Bitcoin spot ETFs just five months after their U.S. debut.
Ethereum, despite being the second-largest cryptocurrency by market cap at approximately $480 billion (compared to Bitcoin’s $1.4 trillion), lacks a similarly dominant narrative. While Ethereum powers decentralized applications, smart contracts, and the broader Web3 ecosystem, its utility-driven value proposition doesn’t resonate as strongly with traditional finance audiences focused on asset preservation.
Caroline Bowler, CEO of BTC Markets Pty, emphasized this disparity: “Ethereum doesn’t have the same recognition as Bitcoin.” She noted that Bitcoin’s dominance in both market size and public awareness makes it far more likely to attract sustained institutional capital.
Moreover, unlike direct Ethereum holdings, most proposed ETFs are expected to hold spot ETH without offering staking rewards—missing out on one of Ethereum’s core yield-generating mechanisms. This structural limitation could further dampen investor interest compared to self-custodied or staked positions.
A Surprise Regulatory Shift Ignites Hope
Despite skepticism, a pivotal moment occurred in May 2025 when the SEC unexpectedly approved the 19b-4 filings for spot Ethereum ETFs from BlackRock, Fidelity, Grayscale, and others. This marked a dramatic reversal from its earlier resistance and mirrored the precedent set during the Bitcoin ETF approval process following a court ruling in 2023.
However, approval of the 19b-4 form is only the first step. ETF issuers must still wait for their S-1 registration statements to become effective before trading can begin on U.S. exchanges. The SEC has already initiated discussions with these firms regarding S-1 details, with analysts estimating a timeline of roughly one month before actual market launch.
This regulatory green light sent Ethereum’s price surging, though it still trails Bitcoin’s performance. Over the past year, Ethereum has gained 109%, while Bitcoin soared 169%, including a new all-time high in March 2025. As of late May, Ethereum traded around $3,847—still below its pandemic-era peak of $4,866.
Divergent Forecasts: Caution vs. Optimism
Market forecasts for Ethereum ETF inflows vary widely. JPMorgan’s Nikolaos Panigirtzoglou projects “modest” net inflows between $1 billion and $3 billion by year-end—paling in comparison to Bitcoin ETFs, which now hold over $62.5 billion in assets.
Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, believes Ethereum products may capture no more than 20% of Bitcoin ETF assets under management—a challenging benchmark given current momentum gaps.
Yet not all voices are bearish. Vetle Lunde, senior research analyst at K33 Research, forecasts up to $4 billion in net inflows within the first five months post-launch. He argues that such demand could create a “massive supply absorption shock,” potentially driving ETH prices significantly higher due to limited liquid supply.
VanEck, another key player preparing an Ethereum ETF, highlights Ethereum’s foundational role in decentralized finance (DeFi), NFTs, and blockchain innovation. Matthew Sigel, VanEck’s head of digital asset research, stated: “Over time, investors will recognize that Ethereum’s ecosystem offers far greater application scale and innovation potential than Bitcoin’s.”
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The Grayscale Effect: Redemption Risks and Market Pressure
A critical concern centers around Grayscale’s plan to convert its $11 billion Ethereum Trust (ETHE) into an ETF—similar to what happened with its Bitcoin Trust (GBTC). When GBTC transitioned in January 2024, massive outflows followed as arbitrageurs capitalized on the closure of its long-standing discount to net asset value.
Crypto analytics firm Kaiko warns that a similar redemption wave could hit ETHE once the Ethereum ETF launches, creating substantial sell-side pressure on ETH prices. While new demand from ETF buyers might offset some outflows, the net impact remains uncertain—especially if institutional appetite lags behind expectations.
Charlie Morris, CIO at ByteTree Asset Management, pointed out that global investor enthusiasm for Ethereum has historically been “tepid.” He noted that investors in Europe and Canada have had access to Ethereum products for years, potentially reducing the novelty factor of U.S.-based ETFs.
Centralization Risks: A Hidden Threat to Ethereum’s Decentralization
Even if demand proves strong, a deeper structural risk looms: network centralization. S&P Global has issued a warning that widespread adoption of Ethereum ETFs could concentrate staked ETH among a handful of custodians—undermining the blockchain’s core principle of decentralization.
Currently, Coinbase controls about 14% of staked Ethereum, while Lido—a decentralized liquid staking protocol—holds 31.7%. However, ETF issuers are more likely to partner with regulated custodians like Coinbase rather than decentralized platforms like Lido.
If major ETF providers funnel large volumes of ETH into Coinbase or similar entities for custody and staking services, it could dramatically increase concentration risk. This scenario raises concerns about single points of failure or even coordinated malicious behavior among validators—threatening network security and reliability.
S&P analysts Andrew O’Neill and Alexandre Birry stress that the impact hinges on whether issuers diversify their staking arrangements. “The effect on Ethereum’s validator concentration will depend on whether ETF sponsors spread their stakes across multiple custodians,” they wrote.
Frequently Asked Questions (FAQ)
Q: Will Ethereum ETFs include staking rewards?
A: Most proposed spot Ethereum ETFs are not expected to distribute staking rewards to investors. This could make direct ownership more attractive for yield-seeking users.
Q: How soon will Ethereum ETFs start trading in the U.S.?
A: After SEC approval of 19b-4 filings in May 2025, issuers must finalize S-1 registration statements. Trading could begin within approximately one month.
Q: Could Ethereum ETFs cause price drops due to redemptions?
A: Yes—Grayscale’s ETHE trust may face significant outflows once it converts to an ETF, creating short-term selling pressure on ETH.
Q: Why is Bitcoin more popular with institutional investors than Ethereum?
A: Bitcoin benefits from a clear narrative as “digital gold” and a simpler value proposition focused on scarcity and store-of-value attributes.
Q: What are the risks of validator centralization from ETFs?
A: If large custodians like Coinbase control excessive staking power through ETF holdings, it could compromise Ethereum’s decentralization and security model.
Q: Are U.S.-based Ethereum ETFs guaranteed to succeed?
A: Success depends on investor demand, product structure, competition from existing international offerings, and how issuers manage custody and staking risks.
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Conclusion
The approval of spot Ethereum ETFs represents a landmark moment for crypto adoption—but not necessarily a guaranteed catalyst for price surges. Wall Street’s cautious outlook reflects deeper structural and narrative challenges facing Ethereum compared to Bitcoin.
While optimistic forecasts predict billions in inflows and potential supply shocks, risks from trust redemptions, weak retail momentum, and network centralization cannot be ignored. Ultimately, the success of Ethereum ETFs will hinge not just on regulatory clearance—but on whether investors view Ethereum as more than just a tech-powered alternative to Bitcoin.
For now, all eyes remain on the SEC’s final green light—and on whether Ethereum can finally step out of Bitcoin’s shadow in the eyes of mainstream finance.