Will an Ethereum ETF follow in Bitcoin’s footsteps?

BITO, the first US-listed Bitcoin ETF, launched with great success last week.

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The Ethereum (CRYPTO: ETH) price is flat over the past 24 hours and up 11% over the last 7 days.

One Ether is currently worth US$4,285 (AU$5,696). That gives the world’s number 2 crypto a market cap of some US$506 billion, according to data from CoinMarketCap.

Bitcoin (CRYPTO: BTC), meanwhile, has slipped 4.1% over the last 7 days, currently trading for US$61,339. But then most analysts had been forecasting a retrace in the Bitcoin price, following last Wednesday’s all-time high-water mark of US$66,930.

BITO helps drive Bitcoin’s price surge

A number of factors aligned over the past month to help drive the Bitcoin price higher.

High among those was the launch of the first US-listed futures-based Bitcoin exchange-traded fund (ETF) last week. (You can get those details here.)

The first day of trading for the ProShares Bitcoin Strategy ETF (NYSE: BITO) beat most every expectation. Turnover on the first day was approximately US$1 billion.

Now, similar factors may be in store for Ethereum. This week it’s due for an upgrade to increase the network speed and possibly bring down user fees.

Upgrade aside, rumours are circulating of a potential Ethereum-tracking ETF launching in US markets.

An Ethereum ETF?

As Bloomberg reports, “crypto liquidity provider B2C2” says that crypto bulls are “using the options market to position for a potential Ether futures exchange-traded-fund announcement.”

According to Bloomberg Intelligence strategist Mike McGlone:

The dollar value of Ethereum futures open interest rising to where Bitcoin was in July indicates that ETFs tracking the No. 2 crypto should be a matter of time. ETF providers have been discouraged by the SEC from launching products on Ethereum, but futures trading, demand-pull forces and competition suggest its inevitability.

While an Ethereum ETF would likely increase the cryptos appeal to institutional investors and those not wishing to deal with crypto wallets and access keys, there are, of course, no guarantees this would sustainably push up the long-term price.

Investors shouldn’t lose sight of the volatility. Remember, as recently as 19 July, Ethereum was trading for as little as US$1,787.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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