BlackRock: ETH ETF a Success, but Limited Without Staking
Quick Summary
BlackRock’s Ether (ETH) exchange-traded fund (ETF) has been described as a “tremendous success” by Robbie Mitchnick, the firm’s head of digital assets. However, he acknowledged that the ETF is “less perfect” due to the absence of staking, a key feature that could significantly enhance returns.
Key Points
- BlackRock’s ETH ETF has been successful but lacks staking capabilities.
- Staking provides meaningful yield (2%-7% annually) but introduces additional risks.
- Adding staking to ETFs involves complex regulatory and operational challenges.
- ETH staking deposits reached $85 billion by February 2024, representing 25% of ETH’s circulating supply.
Staking: A Crucial Missing Feature
Speaking at the Digital Asset Summit, Mitchnick emphasized the importance of staking yields in generating investment returns. He noted that current Ether ETFs launched without staking capabilities, limiting their attractiveness to investors seeking yield.
“A staking yield is a meaningful part of how you can generate investment return in this space,” Mitchnick explained. However, he cautioned that integrating staking into ETFs is not straightforward, involving significant regulatory and technical hurdles.
Ethereum’s Narrative and Institutional Appeal
Ethereum co-founder Joseph Lubin, also speaking at the summit, highlighted the complexity and vast potential of Ethereum. He suggested that Ethereum’s narrative should focus on practical applications rather than abstract concepts, comparing Ethereum’s current stage to the internet’s “broadband moment.”
“We will see applications like social graphs, decentralized ID, attestations, reputation—things that you can use inside of different applications,” Lubin said.
BlackRock’s Pitch to Investors
Mitchnick described Ethereum to institutional investors as a straightforward technology innovation story at a basic level. However, he acknowledged that deeper explanations become more complex, involving blockchain adoption, tokenization, stablecoins, and decentralized finance (DeFi).
BlackRock positions Ethereum as a strategic bet on these emerging trends, aiming to attract institutional interest through clear and tangible use cases.
Current ETH ETF Market Status
- Total ETH ETF holdings: $7 billion (as of March 20).
- Cumulative inflows: $2.5 billion.
- Recent cumulative outflows: $358 million over the past 11 days amid market struggles.
Despite recent outflows, analysts remain optimistic about the long-term potential of ETH ETFs, especially if staking integration becomes feasible.
