Spot Ethereum ETFs are coming: the case against buying ETH ETFs

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Ethereum price has come under intense pressure in the past few months as the recent rally faded. The ETH token was trading at $2,880 on Monday morning, a crucial level where it failed to move below in April and in May. It is also an important level since it was the neckline of the double-top pattern.

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Ethereum price prediction


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The daily chart shows that the ETH price formed a double-top chart pattern around the $4,000 level. In most cases, a double-top is one of the most bearish patterns in the financial market. It often leads to a major bearish breakout in the long term.

Therefore, more Ethereum weakness will be confirmed if the token plunges below the neckline at around $2,800. If this happens, it will open the possibility of the token falling to the next key support level at $2,500 this week.

Worse, Ethereum price has crashed below the 50-day and 200-day Exponential Moving Averages (EMA), which opens the possibility of a death cross pattern forming. A death cross is a situation where the two averages cross each other, leading to more downside. 

Ethereum has also dropped to the 50% Fibonacci Retracement point. Therefore, there is a likelihood that the coin will continue falling in the near term. If this view is correct, the next point to watch will be at $2,500.

Ethereum price chart

Spot Ethereum ETFs to be approved


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The next likely catalyst for the Ethereum price will be the upcoming approval of spot Ethereum ETFs by the Securities and Exchange Commission (SEC). 

Most experts believe that the agency will approve these funds either in the current quarter or in Q4. In a recent statement, Gary Gensler, the head of the agency, noted that this approval will likely happen in September. 

A spot Ethereum ETF will be an important thing for the crypto industry as we saw with Bitcoin earlier this year. These Bitcoin ETFs have already attracted over 14,000 new coins and at the peak, these funds had over $60 billion in assets.

Ethereum ETFs will have a similar performance because of its popularity and the fact that it is the second-biggest cryptocurrency in the world.

The case against buying these funds


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Investors will have two main choices when the spot Ethereum ETFs are approved: buying the ETF or Ether itself. 

To large institutional investors, it makes sense to buy Ethereum ETFs because of their ease of use and liquidity. Maintaining these keys are quite difficult for an institutional investor. 

For an ordinary investor, however, there are two main reasons why investing in Ether itself is much better. 

First, it is cheaper to buy Ethereum than ETFs. When you buy ETH, you only pay the transaction fee to the exchange and that’s it. You will then pay a small fee when selling the coin. 

With spot Ethereum ETFs, you will pay an annual expense ratio, which will likely be about 0.25%. These fees will add up over time. For example, if you buy Ether ETFs worth $100k, your fees will be $250. In ten years, you will pay $2,500 if Ether remains the same. As such, while the expense ratio is not all that expensive, the numbers can add up over time.

Second, these ETFs will not have staking features, meaning that holders will only make money when the token rises. Data by StakingRewards shows that Ether has a reward rate of 3.09%, meaning that a $100k investment makes about $3,000 in staking rewards. 

Therefore, by buying Ethereum ETFs, you will pay a small expense ratio while also avoiding the staking rewards. As such, it makes sense to buy and stake Ether instead of these ETFs.