In a recent interview, U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce reopened the discussion about adding staking features to Ethereum ETFs (exchange-traded funds) after their upcoming launch, possibly on July 23.
Initially, ETF issuers such as VanEck and Fidelity had requested permission to stake the underlying Ethereum held in their portfolios. some productsHowever, they may have removed this component as one of the requirements for SEC approval of these index funds in May.
Reintroducing staking in Ethereum ETFs?
During the interviewCommissioner Peirce expressed her view that features such as staking, omitted from approved Bitcoin ETFs, remain open to reconsideration.
While acknowledging that other commissioners might not share her view, she noted the possibility of revisiting the features of Ethereum ETF products after they begin trading. Peirce said:
I’m definitely thinking something like staking, or any product feature – we’ve seen that on products traded on the Bitcoin exchange as well, right? There are some product features that I would have liked to have included but weren’t – those are still open for reconsideration as far as I’m concerned.
Peirce also expressed disappointment in his remarks over the increasingly difficult nature of cryptocurrency. approval process Bitcoin and Ethereum ETF applications and stressed the importance of a smooth and drama-free product launch:
We shouldn’t be trying to create drama around launching products like this. It should just be, you know, they can be marketed and we’ll see if people want to buy them or not and that’s the way it should be.
Potential Benefits of Staking and ETFs
Staking involves token holders earn rewards by securing their tokens and contributing to the security of a blockchain network. In the Ethereum staking process, validators lock up increments of 32 ETH to activate validators responsible for storing data, processing transactions, and adding new blocks to the blockchain.
By design, requiring validators to secure and operate with staked tokens discourages malicious behavior that could compromise the network, for which the inclusion of staking would increase the yield potential, allowing investors to be rewarded for their participation in the network’s consensus mechanism.
Institutional InvestorsRetail investors and asset managers familiar with staking as a mechanism could be attracted to investing in these ETFs, leading to increased demand and inflows into the new Ethereum ETF market.
Despite the lack of staking features in the Ethereum ETF market, analysts predict strong demand for Ethereum ETFs in the first few months of trading, with one exception.
Mixed predictions
Fundstrat’s Sean Farrell, for example, anticipates net inflows of more than $5 billion in the first few months of trading. Similarly, JPMorgan strategists led by Nikolaos Panigirtzoglou estimate that potential Ether portfolios will attract a “modest” net flow of $1 billion to $3 billion over the rest of the year.
Vetle Lunde, Senior Research Analyst at K33 Research, a cryptocurrency specialist, predicted $4 billion in net inflows to Ethereum ETFs in first five months and a significant “supply absorption shock” that could boost ETH price.
However, Bitcoinist reported that analysts at global asset management firm Bernstein have expressed bearish sentiment on the prospects of these new Ethereum ETFs, as they could see lower demand than spot Bitcoin ETFs due to the lack of staking features.
At the time of writing, the second-largest cryptocurrency on the market is trading at $3,395, down more than 1.5% over a 24-hour period but up 9% over the past week.
Featured image of DALL-E, chart from TradingView.com
