Welcome to the July edition of the COSIMO Verbatim newsletter! This month we’re bringing you the latest industry news, a deep dive into the Ethereum ETF launch, portfolio updates, and more from our summer series of blockchain insights.

July Insights

Crypto Markets Surge On Inflation Hitting Three-Year Low

Goldman Sachs to Launch Three Tokenization Projects in 2024

Solana Achieves Record Highs: $5.65B TVL, 42% DEX Volume, and Flips Ethereum in 24-Hour Fees

Coinbase Asset Management Plans Tokenized Money-Market Fund, a Hot Area After BlackRock's BUIDL Success

Ferrari extends cryptocurrency payment system to Europe after US launc

Solana Sees Arrival of Nomura, Brevan Howard-Affiliated Tokenization Firm Libre

 

Ethereum ETF Launch

The launch of the Ethereum ETF is a historic event, marking one of the largest ETF debuts in history, following the Bitcoin ETFs launched prior this year. This significant milestone highlights the growing integration of blockchain technology within traditional finance. Following a similar pattern to Bitcoin's ETF launch, the Ethereum ETF has led to initial outflows from legacy products such as Grayscale's ETHE, as investors migrate to lower cost investment vehicles. BlackRock’s ETF investment chief Samara Cohen believes that crypto ETFs will begin to hit “model portfolios” by year end as investors seek access to portfolio diversifiers such as Bitcoin and Ethereum. 

Ethereum, the second largest crypto asset and the leading smart contract platform, continues to drive blockchain adoption across various industries. The ETF provides direct access to Ethereum, simplifying investment without the need for managing digital wallets. This launch not only underscores Ethereum's pivotal role in the crypto ecosystem but also signals broader acceptance of blockchain technology in traditional finance. As the Ethereum ETF attracts institutional and retail investors, it is poised to enhance market liquidity and foster further innovation in blockchain applications, marking a significant advancement for the crypto industry.

Understanding Ethereum ETFs

Ethereum ETFs represent a pivotal innovation in the world of investment, offering a structured way for both institutional and retail investors to gain exposure to Ethereum without the complexities associated with directly purchasing and storing cryptocurrencies. Ethereum ETFs track the price of Ethereum (ETH), allowing investors to benefit from its price movements without needing to manage digital wallets or understand the intricacies of blockchain technology.

With the SEC's approval, several spot Ethereum ETFs have commenced trading, including those from 21Shares, Bitwise, Fidelity, Franklin Templeton, Invesco Galaxy, iShares, and VanEck. These ETFs are listed on major exchanges, providing investors with a regulated and transparent means to access Ethereum. The base fees for these ETFs range from 0.15% to 0.25%, with some issuers initially waiving fees to attract investors.

Bitwise’s chief investment officer Matthew Hougan, projects that ETH ETFs could attract up to $15 billion in net inflows by the end of 2025, reflecting growing mainstream acceptance of cryptocurrencies. Currently, several types of Ethereum ETFs are available, including both spot and futures ETFs. Spot ETFs hold actual Ethereum, while futures ETFs are based on Ethereum futures contracts, which speculate on the future price of Ethereum. The introduction of these ETFs is seen as a significant step toward integrating digital assets into the broader financial system, providing a safer and more regulated avenue for crypto investment . This regulatory oversight is crucial for risk-averse investors who are cautious about the volatility and security risks associated with cryptocurrencies . 

The accessibility of Ethereum ETFs is likely to increase trading volume and liquidity for Ethereum, driving more consistent market activity and potentially reducing price volatility over time. This development paves the way for Ethereum to solidify its position as a leading digital asset, fostering greater innovation and adoption across industries.

Market Reaction to the Ethereum ETF Launch

The recent launch of Ethereum ETFs in the U.S. marked a significant milestone for the crypto industry, but the initial response has been mixed. In the first week, while the newly launched ETFs attracted impressive net inflows of over $1 billion, this was overshadowed by significant outflows from Grayscale's ETHE, resulting in a net outflow of $341.8 million across the Ethereum ETF space. This contrasting debut highlights both the challenges and the opportunities ahead for Ethereum ETFs. BlackRock's ETHA led the way with $442 million in net inflows, followed closely by Bitwise’s ETHW with $265.9 million, and Fidelity’s FETH with $219.4 million. Other ETFs, such as VanEck’s ETHV and Franklin Templeton’s EZET, also saw positive inflows, showing strong interest despite the overall net outflow.

Analysts like Bloomberg's James Seyffart emphasize that the massive ETHE outflows were unexpected but not entirely surprising, considering the ETF's unique position and investor sentiment towards Grayscale products. While the Ethereum ETFs didn’t match the strength of Bitcoin ETFs in terms of inflows, they still demonstrated healthy volume, capturing 34% of Bitcoin ETF's trading volume during their initial days. Despite these challenges, crypto analysts remain optimistic, predicting that Ethereum ETFs could attract monthly net inflows of $750 million to $1 billion. Eric Balchunas from Bloomberg suggests that while the initial days might be rocky, the intensity of the outflows should taper off, and the outlook remains positive for Ethereum ETFs.

The trading volumes for Ethereum ETFs have also been promising, accounting for 55% of the trading volume of Bitcoin ETFs in the same period. While early trading volumes are important indicators, as noted by Seyffart, the real test will be the sustained interest over the coming weeks and months. This period will provide a clearer picture of investor sentiment and demand. As the market adjusts to this new class of investment vehicles, the continued growth of Ethereum ETFs will depend on their ability to draw interest beyond the initial launch hype, indicating a broader acceptance and integration of Ethereum into traditional finance.

Ethereum’s Promising Future

Aside from the ETFs, Ethereum's future looks incredibly promising as it continues to expand its influence beyond cryptocurrency into various industries. A recent report by VanEck highlights Ethereum's potential to capture significant market share in sectors such as Finance, Marketing, and Artificial Intelligence, with a total addressable market (TAM) estimated at $15 trillion. In Finance, for instance, Ethereum is projected to facilitate faster transactions and enhance security, capturing a portion of the $10.9 trillion market. Similarly, in Marketing and Gaming, Ethereum's blockchain technology can improve transparency and offer tokenized incentives, leading to significant adoption.

Ethereum's robust ecosystem and scalable solutions position it as a leader in digital transformation. Its revenue capabilities often surpass those of traditional Web2 companies, with Ethereum generating $3.4 billion in revenue, exceeding companies like Etsy and Twitch. The platform also boasts a strong user base, with over 25 million monthly active users, each generating substantial annual revenue. As blockchain adoption grows and regulatory landscapes evolve, Ethereum and other smart contract platforms are poised to reshape industries and drive innovation, highlighting their pivotal role in the future of the digital economy.

Implications for the Blockchain Industry

The launch of Ethereum ETFs is a significant milestone for the blockchain industry, particularly in terms of institutional adoption. Unlike Bitcoin, which is often seen as a store of value, Ethereum offers potential as an infrastructure layer for decentralized applications in sectors such as finance, supply chain, and technology. This utility makes Ethereum an attractive option for institutions seeking portfolio diversification. As regulatory frameworks become clearer, Ethereum's integration into traditional finance is likely to accelerate.

The approval of Ethereum ETFs is also expected to be a catalyst for market growth. It is likely to attract substantial capital inflows from investors who prefer the security and oversight of regulated markets. As more jurisdictions approve crypto-related financial products, they bring in investors who were previously hesitant due to regulatory uncertainties. This increased exposure will add legitimacy to Ethereum and benefit the broader digital asset ecosystem, encouraging more people to invest in other digital assets and companies driving innovation within the blockchain space.

While initial trading volumes for Ethereum ETFs may not yet rival Bitcoin ETFs, the long-term impact on Ethereum and the broader crypto industry is poised to be substantial. These developments are fostering greater acceptance and innovation within the financial sector, positioning Ethereum as a key player in the future of digital finance.

 

Portfolio Updates

Archax, the only FCA-regulated digital asset platform, has forged a strategic alliance with Entoro Capital to promote digital securities and investment opportunities. More here.

Hedera, a leading Proof of Stake (POS) blockchain platform, has formed a strategic partnership with Deloitte aimed at improving the verification process of companies’ Environmental, Social, and Governance (ESG) impact and sustainability claims. More here.

Sovryn, a decentralized protocol for Bitcoin lending and margin trading, is involved in a major strategic integration with Portal to Bitcoin, the groundbreaking platform dedicated to unlocking Bitcoin liquidity. More here. 

 

Blockchain Insights Summer Series

Our Summer Series of Blockchain Insights continues to deliver thought-provoking content for our crypto-curious community. This series has been our way of keeping you informed and inspired with the latest and greatest in blockchain and crypto. We've covered insightful podcasts, must-read articles, and more, ensuring your blockchain journey is as vibrant as ever.

So far in the series, we've explored:

A podcast episode from The Scoop by The Block featuring Arca's CIO, Jeff Dorman. He discusses why Wall Street should market Ethereum as the crypto 'app store' and how this narrative could drive more investment flows.

An episode of the Defactor podcast called "Marketing an RWA Ecosystem." In this conversation, Sebastiaan Opschoorand Adam Bouktila delve into the challenges and strategies of marketing specifically for RWA.

An episode from Hedera Hashgraph podcast titled "The Digital Economy: Not Just a Future Promise; It's a Current Opportunity." Zenobia G., from Hashgraph, and Xiang Xu, from Mondelēz International discuss how traditional industries are adapting to the modern digital economy.

An episode of the 5 GOATs RWA and Tokenization Podcast: "Exploring the World of Tokenization with Black Manta Capital." Alexander Rapatz, founding partner at Black Manta Capital Partners, shares his journey from corporate finance to blockchain innovation.

An episode of the Casper Association podcast: "The Future of Finance: Blockchain, AI, and Regulatory Challenges." The hosts sit down with Aaron Klein, a senior fellow at The Brookings Institution to explore how blockchain technology and AI are poised to revolutionize financial systems.

An article from Shyft Network titled "𝘡𝘦𝘳𝘰-𝘒𝘯𝘰𝘸𝘭𝘦𝘥𝘨𝘦: 𝘛𝘩𝘦 𝘍𝘶𝘵𝘶𝘳𝘦 𝘰𝘧 𝘔𝘰𝘳𝘦 𝘚𝘦𝘤𝘶𝘳𝘦 𝘢𝘯𝘥 𝘚𝘤𝘢𝘭𝘢𝘣𝘭𝘦 𝘉𝘭𝘰𝘤𝘬𝘤𝘩𝘢𝘪𝘯." The piece discusses how Zero-knowledge technology (ZK) is revolutionizing blockchain by enhancing privacy and scalability. 

As the series wraps up, stay tuned for more insights that will expand your knowledge and spark new ideas.