Investors Shift Focus to Ether ETFs as Ethereum’s Pectra Upgrade Looms
Published: February 18, 2025, 6:05 a.m. UTC | Updated: February 18, 2025, 6:28 a.m. UTC
In a significant market development, investor sentiment has shifted towards ether (ETH) exchange-traded funds (ETFs) amidst the cryptocurrency’s upcoming Pectra upgrade, which is anticipated to positively influence the Ethereum network. This shift comes on the heels of a price decline for ether early in the month, where it dipped to $2,000 on various exchanges. Contrary to expectations that this dip might deter investors, recent data indicates a robust interest in ether.
Strong Inflows into Ether ETFs
According to statistics from Farside Investors, the nine U.S.-listed ether spot ETFs have collectively seen net inflows totaling $393 million in February, an impressive increase that is seven times the inflows recorded in January, as reported by Glassnode. Remarkably, these funds only experienced outflows on two trading days during this period. Meanwhile, the 11 bitcoin ETFs have struggled, facing a net outflow of $376 million this month, reflecting a lack of investor confidence, as these funds recorded inflows on merely four trading days.
The Role of Carry Trading
The substantial pivot to ether is largely driven by a trading strategy known as carry trading. This method involves simultaneously purchasing spot ETFs while shorting ETH futures contracts on the CME. Additionally, some investors may also be pursuing outright bullish positions on ether, thereby enhancing demand for these ETFs.
Despite the increased activity in ether ETFs, this investor enthusiasm has not yet translated into surging prices for ether itself. Since the price crash on February 3, ether has generally traded in a stable range between $2,600 and $2,800. Bitcoin, too, has been fluctuating within a narrow band below $100,000 amidst volatility in meme coin markets.
Pectra Upgrade and Market Optimism
Despite the current price stagnation, experts are optimistic about the potential for price increases ahead of Ethereum’s upcoming Pectra upgrade, scheduled for April 8. This upgrade aims to enhance both the execution and consensus layers of Ethereum, positioning it to better compete with rival Layer 1 blockchains such as Solana. Nick Forster, founder of the decentralized options platform Derive.xyz, expressed a positive outlook in an email, stating, "ETH has a solid foundation for a resurgence."
Forster pointed out that Ethereum’s co-founder Vitalik Buterin is advocating for a tenfold increase in the Layer 1 gas limit, which could lead to improvements in application development and overall security on the platform. Additionally, the Ethereum Foundation’s recent allocation of $120 million towards decentralized finance (DeFi) projects indicates a renewed commitment to increasing adoption and institutional interest, particularly through an initiative named ETHrealize, led by Vivek Raman. This initiative aims to bridge traditional financial institutions with the blockchain ecosystem.
Future Price Predictions
Reflecting on these developments, Forster noted an increase in projections, stating, "There’s now a 30% chance ETH will hit above $3,000 by the end of the quarter, up from 28% last week." As the Ethereum community looks forward to the Pectra upgrade, market watchers will be keeping a close eye on how these events will impact investor sentiment and ether’s price trajectory.
Omkar Godbole, a Co-Managing Editor on CoinDesk’s Markets team based in Mumbai, brings expertise in finance and technical analysis to his coverage of cryptocurrency markets. Godbole previously contributed to FXStreet and has experience as a fundamental analyst in currency and commodities markets.
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