Not one to show his hand, SEC Chair Gary Gensler still gave as optimistic a prognosis on Ethereum ETFs as could be expected yesterday, speaking at the Bloomberg Invest conference. In between his usual frosty statements on the crypto sector, including accusing his interviewer of going after "clicks," Gensler said the process of working with issuers was "going smoothly."
The rare acquiescence from Gensler seems to confirm predictions from the Bloomberg soothsayers that the ETFs could launch as soon as July 2. With crypto assets from Coinbase to Bitcoin cratering in recent days, could the arrival of an Ethereum ETF reinvigorate the bull market? After all, the approval and launch of Bitcoin ETFs back in January served as a catalyst for the current rally.
The short answer is: probably not. Ethereum has always been the less-loved younger sibling to Bitcoin, even with its newfangled capacity for smart contracts, improved transactions, staking, and a slew of other advantages. It's been years since anyone predicted the "flippening"—that fabled day when Ethereum overtakes Bitcoin—with a straight face.
I caught up with Christopher Perkins, the president of the VC firm CoinFund, who told me that one of the main challenges for Ethereum will be branding. Bitcoin is easy. The proto-cryptocurrency laid claim to the moniker "digital gold," which any investor can understand. A baby boomer looking where to allocate the millions of dollars scored from selling a house they bought in 1970 for $10,000, however, might have a harder time understanding the value proposition of Ethereum. What exactly is a smart contract, and why should we care? "Those boomers, with the money—they don't ape into things," Perkins told me.
Even with the hype around the Bitcoin ETF, we're seeing slow adoption as investors grow more comfortable with the new asset class. As Perkins said, ETFs offer two main advantages: regulatory certainty coupled with operational scalability, or improved user experience. Bitcoin, thanks to its early commodity designation, was never really in a regulatory gray zone, though ETFs made it easier for people to buy them directly into their brokerage accounts, rather than setting up a Coinbase or Robinhood account. With Ethereum, however, the approval and launch of ETFs does genuinely create a safety moat that didn't exist before, especially after months of speculation that the SEC would reject the applications.
Furthermore, an Ethereum ETF that offers yield could be a game-changer, if the SEC ever approves them. Last year, Perkins spearheaded a project to provide a benchmark rate for the staking yield on Ethereum, which he pointed out is often higher than Treasury rates, when adjusted for inflation. "The ETF is going to be very important, but it's also imperfect because it's going to deprive investors of that yield out of the gate," he said.
So if Ethereum ETFs do finally come next week, or soon after, don't expect a spike in adoption. But Perkins said to take a long-term view: "This is just another step in mainstreaming and regulatory de-risking.”
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
