Ethereum ETF: Buy the rumor, sell the news?

Spot ether ETFs, which will enable investors to buy the second most popular cryptocurrency just like stocks, are set to start trading in the U.S. next week.

The Securities and Exchange Commission (SEC) has approved filings from at least three issuers, with a total of eight Ethereum ETFs expected to launch at the same time.

Talking to Investing.com, Saul (Shauli) Rejwan, managing partner at Masterkey VC, said he believes the launch of Spot Ether ETFs has the potential to drive Ethereum’s price to new all-time highs, similar to what happened with Bitcoin.

“It’s funny to think about it, but the main market driver isn’t meme coins, Elon Musk, Larry Fink’s admiration for Bitcoin, or the opportunities AI and infrastructure present for crypto. It’s actually the USA politics that have pushed for regulation after many years of resistance,” said Rejwan.

The major altcoin started its rally in earnest in June as it became clearer that the Ether funds would soon be approved.

Rejwan attributed this to “increased accessibility and legitimacy,” which could attract a broader range of investors. However, he cautioned that market dynamics and broader economic conditions will also play crucial roles in determining price movements.

A ‘buy the rumor, sell the news’ event?

Rejwan acknowledges the possibility. “It's possible that the launch of Ether ETFs could follow the 'buy the rumor, sell the news' pattern. Just before May, Ethereum's price was around $2.5k, indicating that some of the news is already priced in.”

“However, I’m not sure all the news is out there. The presidential campaign has just shifted gears, and I’d say more developments are on the horizon. My eyes are on the Nakamoto stage in Nashville later this month.”

He notes that market participants often anticipate such events and price in their expectations beforehand. “When the actual event occurs, some investors might take profits, leading to short-term volatility. Nonetheless, the long-term impact of Ether ETFs is likely to be positive due to the structural support they provide.”

Comparing Ethereum and Bitcoin ETF inflows

The January launch of U.S.-based spot bitcoin exchange-traded funds was one of the most successful in the ETF history, attracting around $16 billion in lifetime net inflows. By late June, those funds tracking the spot price of Bitcoin had nearly $38 billion in assets. However, the holdings of Grayscale fund, which converted its $27 billion Bitcoin trust into an ETF, dipped by over a third.

Rejwan expects Ethereum ETF inflows post-approval to differ from Bitcoin's experience due to Ethereum's unique value propositions.

Although Ether has become something of a blue-chip coin, its ETFs could be smaller, at least initially, compared to their Bitcoin counterparts as features like smart contracts and decentralized applications attract a different investor base. "While the initial inflows might not mirror Bitcoin’s exactly, we anticipate substantial interest from both institutional and retail investors," he said.

Opening the door for other crypto ETFs

Rejwan believes that the successful launch of Ether ETFs could pave the way for Solana ETFs and other crypto exchange-traded products.

"Once the regulatory and market frameworks are established for one major asset, it becomes easier to introduce additional products," he stated. This could lead to “a more diverse and robust market” for crypto-based ETFs, broadening investor participation and further legitimizing the space.