Those expecting to see cash pouring into spot ethereum ETFs at a pace similar to what happened with their bitcoin counterparts may be disappointed, according to analysts from JPMorgan.

"The initial market reaction to the launch of spot ethereum ETFs is likely to be negative," wrote the team of analysts led by Nikolaos Panigirtzoglou, in a 25-page "Flows & Liquidity" report issued Thursday. Ethereum ETH -1.65% -related commentary took up less than one page of the report.

Not keeping up with spot bitcoin ETFs

Spot ether ETFs won't see the sort of rush of money spot bitcoin ETFs did when they launched, according to the report. Products in the latter category by BlackRock and Fidelity broke records by each accruing $10 billion in assets under management in a matter of weeks. 

"We believe the demand for spot ethereum ETFs would be a fraction of that seen for spot bitcoin," the JPMorgan analysts wrote, while listing several reasons why they see spot ether ETFs not being in league with those of bitcoin. 

First, the analysts said, bitcoin had a "first mover advantage" and thus sopped up much of the demand for crypto assets in response to spot bitcoin ETF approvals.

Another reason they cited was that bitcoin's halving event, which occurred a month ago, "acted as an additional demand catalyst for spot bitcoin ETFs." While Ethereum's proof-of-stake (PoS) consensus mechanism doesn't have a similar event, it should be noted that bitcoin's next halving won't occur until 2028. 

On the flip side, since the ETFs removed staking from their filings, this makes them "less attractive compared to platforms that offer staking yield," the JPMorgan analysts also argued.

The researchers also see bitcoin's role as "competing with gold in portfolio allocations," something that ether, positioned as a token for applications, falls short of. Lower liquidity in ether, the second-largest cryptocurrency based on market capitalization, also makes it less desirable to hedge and quant funds, they said. 

JPMorgan cites Ethereum's smaller market cap as a reason they expect "a modest" $1 billion to $3 billion in net inflows during the remainder of 2024, assuming they go live before the end of the year.

The analysts predicted, however, net inflows could triple if staking is at some point added to the ETFs. But for that to happen Congress would have to legislate that ether is a commodity, the analysts said. 

Grayscale Ethereum Trust's outlook

For comparison, total assets under management for spot bitcoin ETFs was $59 billion as of May 30, according to data from The Block. The day spot bitcoin ETFs began trading in January, Grayscale Bitcoin BTC -1.047% Trust's AUM sat at $28.7 billion. As of Thursday, Grayscale Ethereum Trust's AUM was $11 billion. 

Like Grayscale's bitcoin product, its ether ETF will likely see money flowing out of it once trading begins for the new ethereum-based products, warned the analysts. "We expect around $1 billion to exit the Grayscale Ethereum Trust as speculative investors, who previously bought the ETHE in anticipation of it being converted to ETF, are likely to take profit, thus exerting downward pressure on ethereum prices soon after the launch of spot ethereum ETFs," they wrote.