Ethereum ETF Staking Impact: Why a Strong ETH Price Rally is Critical

Are you following the latest developments around the Ethereum ETF and wondering about the potential impact of ETH Staking? A prominent analyst suggests that while staking approval is a positive step, its effect on fund inflows might be limited unless the ETH Price experiences a significant, sustained upward trend. Let’s dive into why market performance could be the real driver for these investment vehicles.

Understanding the Ethereum ETF and ETH Staking Potential

Spot Ethereum ETFs, if approved for staking, could offer investors a way to earn yield on their Ether holdings within a traditional investment structure. However, Bloomberg ETF analyst Eric Balchunas points out that simply allowing staking might not be enough to attract substantial inflows. He believes the primary challenge for these funds isn’t the lack of staking yield, but rather the underlying asset’s price performance.

Balchunas noted on the New Era Finance Podcast that while staking approval would ‘help a little,’ it ‘can’t hurt.’ The real issue, according to him, is the lack of a sustained rally in the ETH Price since the launch of Ether futures ETFs last year.

Why Isn’t the ETH Price Driving Spot Ethereum ETFs Like Bitcoin?

Comparing the performance of Ether futures ETFs to the recently launched Spot Bitcoin ETFs highlights a key difference. Bitcoin saw new all-time highs just two months after its spot ETFs launched in January 2024, leading to significant inflows. In contrast, Ether experienced a price drop after its futures ETFs launched.

Balchunas emphasized, ‘The bigger problem with Ethereum is performance; it just doesn’t ever go on a nice long rally.’

He cited a brief period in December when a Crypto Market Rally, partly sparked by news surrounding Donald Trump, saw ETH surge. This surge correlated directly with a 19-day positive inflow streak into Ether futures ETFs, totaling approximately $2.44 billion. However, following that peak, ETH entered a downtrend, losing over 50% of its value.

What Needs to Happen for Spot Ethereum ETFs to See Significant Inflows?

According to Balchunas, for inflows into Spot Ethereum ETFs to increase meaningfully, two main factors are needed:

• A ‘multimonth run’ in the ETH Price.
• A ‘strong narrative’ supporting the price increase.

He stressed that the asset ‘needs something that is more than just a good week here and there.’ The initial price decline after the futures ETF launch made recovery difficult, unlike the favorable market conditions Bitcoin ETFs experienced.

The Path Ahead for ETH Staking Approval

While the focus is on price performance, the possibility of US-based Spot Ethereum ETFs offering staking remains a key point of discussion. ETF issuers have filed requests with the US Securities and Exchange Commission (SEC) for permission to stake a portion of their holdings.

Bloomberg ETF analyst James Seyffart commented on the timeline, stating that while early approval is ‘possible,’ the final deadline for a decision on staking is likely tied to the final ETF approval deadlines, with potential intermediate deadlines in late May and late August, and the ultimate decision expected by the end of October.

Concluding Thoughts: Price is Paramount

Ultimately, the success and inflow potential of Spot Ethereum ETFs, even with the added benefit of ETH Staking, appear heavily reliant on the underlying asset’s price action. While staking adds an attractive yield component, a sustained Crypto Market Rally and a strong upward trend in the ETH Price are seen by analysts like Eric Balchunas as the critical factors for attracting significant investor interest and driving fund growth. Investors will be watching closely to see if Ether can build the momentum needed to capitalize on the potential launch of staking-enabled ETFs.