Ethereum Expected to Strike a Chord with Financial Advisors

In the world of cryptocurrencies, ethereum is expected to be the name that starts resonating with financial advisors. 

With the Securities and Exchange Commission approving nine ethereum futures-based ETFs, crypto experts say, unlike bitcoin, ethereum will start to check a lot of boxes with advisors. 

Matt Hougan, chief investment officer at Bitwise Investments, said the growing list of “real world” uses for ethereum will go a long way to convincing advisors that it is a cryptocurrency that can’t be ignored. 

“Bitcoin is the big dog crypto; it's got the largest market cap, it's got the most brand recognition, et cetera, et cetera, but it doesn't have associated users or revenue, or use cases that are as tangible to many people as ethereum,” he said.  

Some examples that move ethereum closer to the more tangible wealth management universe include UBS’ launch of a tokenized money market fund on ethereum. Goldman Sachs joined two European banks to issue a $100 million bond on the ethereum blockchain, which settled in one hour. 

“All the large banks are experimenting with ethereum right now,” Hougan said. 

Ric Edelman, founder of the Digital Assets Council of Financial Professionals, believes the new ethereum ETFs could represent a tipping point to get advisors off the fence when it comes to crypto. 

“Half of the nation’s advisors personally own bitcoin, but fewer own ethereum, and even fewer currently recommend either to clients,” he said. “That is primarily because there’s no spot ETF for either coin available, which makes the futures ETFs the alternative that many are considering.” 

Ethereum ETF appeal

The appeal of ethereum over bitcoin, Edelman added, comes down to “many people view ethereum as the superior choice over bitcoin, because of its broader capabilities.” 

“Adoption is rising fast, and forward-thinking advisors realize they need to understand this new technology so they can properly serve their clients,” he said.  

Hougan expects advisors to embrace ethereum because the blockchain operates similar to a publicly traded stock, in terms of supply and demand. 

“Every year about 1% of new ethereum is issued by the blockchain,” he said. “Every time someone uses ethereum to send or conduct a real-world transaction, you pay a fee and that fee is paid in ethereum and that ethereum is then destroyed, reducing the amount of ethereum.” 

Hougan compares that to stock buybacks that reduce the number of outstanding shares, which drives up the value of a company’s stock. 

Advisors Favor Ethereum over Bitcoin?

There’s also a component of ethereum that is analogous to dividend payments. 

Known as a staking reward, owners of ethereum get paid to help build out the blockchain platform. 

“Ethereum is driven by cashflow,” Hougan said. “The more people there are who want to use ethereum, the more revenue it generates.” 

Tyrone Ross, chief executive and co-founder of Turnqey Labs, said the “staking yield” component will help advisors distinguish ethereum from bitcoin. 

“Advisors find ethereum appealing because you can run some analysis on it because it has staking yield,” he said. “It’s easy to see all the things being built on top of the platform.” 

Ross added that the staking aspect will also appeal to environmentally conscious investors because it reduces energy-intensive mining requirements associated with bitcoin. 

“It takes the mining out of the equation,” he said. “One is very energy intensive, and one is not, but to have a say in how ethereum moves forward, you have to put up more stake.” 

Contact Jeff Benjamin at [email protected] and find him on X: @BenjiWriter