Those anticipating a surge of cash into spot Ethereum ETFs similar to the influx seen with Bitcoin ETFs may be disappointed, according to JPMorgan analysts.

"The initial market reaction to the launch of spot Ethereum ETFs is likely to be negative," wrote the analysts, led by Nikolaos Panigirtzoglou, in a 25-page "Flows & Liquidity" report released Thursday. Ethereum-related commentary occupied less than a page of the report.

### Not Matching Spot Bitcoin ETFs

Spot Ether ETFs are unlikely to attract the same level of investment as spot Bitcoin ETFs did upon their launch, according to the report. Bitcoin ETFs by BlackRock and Fidelity each quickly accrued $10 billion in assets under management, breaking records.

"We believe the demand for spot Ethereum ETFs will be a fraction of that seen for spot Bitcoin," the JPMorgan analysts wrote, citing several reasons for this expectation.

First, Bitcoin had a "first mover advantage," absorbing much of the demand for crypto assets with the approval of spot Bitcoin ETFs. Additionally, Bitcoin's recent halving event acted as an additional demand catalyst for spot Bitcoin ETFs. Ethereum's proof-of-stake (PoS) mechanism lacks a comparable event, with Bitcoin's next halving not expected until 2028.

Furthermore, the removal of staking from Ethereum ETF filings makes them "less attractive compared to platforms that offer staking yield," the analysts argued. They also noted Bitcoin's role in "competing with gold in portfolio allocations," a position Ethereum, as a token for applications, does not fulfill. Lower liquidity in Ethereum also makes it less appealing to hedge and quant funds, they added.

JPMorgan predicts Ethereum's smaller market cap will result in "a modest" $1 billion to $3 billion in net inflows for spot Ethereum ETFs in the remainder of 2024, assuming they launch before the end of the year.

However, the analysts suggested net inflows could triple if staking is added to the ETFs. For this to occur, Congress would need to legislate that Ether is a commodity, they said.

### Grayscale Ethereum Trust's Outlook

For comparison, total assets under management for spot Bitcoin ETFs was $59 billion as of May 30, according to The Block. On the day spot Bitcoin ETFs began trading in January, Grayscale Bitcoin Trust's AUM was $28.7 billion. As of Thursday, Grayscale Ethereum Trust's AUM was $11 billion.

The analysts warned that Grayscale's Ether ETF might see outflows once new Ethereum-based products begin trading. "We expect around $1 billion to exit the Grayscale Ethereum Trust as speculative investors, who previously bought the ETHE anticipating it being converted to an ETF, are likely to take profit, thus exerting downward pressure on Ethereum prices soon after the launch of spot Ethereum ETFs," they wrote.