The approval of bitcoin {{BTC}} and ether {{ETH}} spot exchange-traded funds (ETFs) is encouraging and while digital assets underperformed traditional assets in the second quarter, potential ETF inflows could reverse the recent trend, broker Canaccord Genuity said in a quarterly report on Sunday.
Spot ETFs are expected to become a more meaningful part of crypto’s price action, analysts led by Michael Graham wrote.
Canaccord notes that while bitcoin ETF inflows slowed from the February highs, institutional adoption is still growing,and “more than 50% of the world’s largest hedge funds are now trading/holding spot BTC ETFs, major institutions have only just started to disclose holdings and the SEC may soon approve BTC ETF options.”
Retail investors may also look to buy ETFs to gain crypto exposure via individual retirement accounts (IRAs) and other tax-advantaged accounts, the report said. Bitcoin spot ETFs were first approved for trading in the U.S. in January of this year.
The launch of ether spot ETFs is expected later this summer after the SEC approved initial filings from issuers last month. The regulator needs to endorse S-1 filings before the new products can start trading. Despite macro uncertainty and the timing of any future interest rate cuts, “favorable supply-demand dynamics post-halving could add to the ETF tailwinds for bitcoin,” Canaccord said.
Spot ether ETFs, once they start trading, could also have a positive impact, and “should help broaden institutional appetite for other assets,” benefiting the wider crypto ecosystem, the report added.