After dominating the news throughout December 2023 and January 2024, the prospect of an XRP exchange-traded fund (ETF) has reignited discussions within the cryptocurrency community.
A recent proposal by prominent figure Chad Steingraber (@ChadSteingraber) has shed light on the potential impact of such a financial product on XRP’s value and accessibility for institutional investors.
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Steingraber’s core proposition revolves around the price at which an XRP ETF might trade. His scenario hinges on the possibility of XRP reaching $5 per unit. In this scenario, he theorizes that the corresponding ETF could trade at a significant premium, potentially reaching $500 per share.
Steingraber believes the high institutional demand for the XRP ETF will send it to his $500 target. He points to the Grayscale Litecoin Trust (LTCN) as a case study. Similar to his proposed XRP ETF, LTCN trades at a premium more LTC market price. This phenomenon highlights the potential for XRP ETF to experience a similar dynamic, should it attract substantial institutional investment.
The prospect of such a high premium for an XRP ETF raises questions about potential arbitrage opportunities. A community member asked if XRP holders could exploit this price disparity by exchanging their tokens directly for ETF shares.
Steingraber acknowledged this possibility but with a caveat. In-kind deposits, which would allow such direct exchange, are uncommon in the current ETF landscape. While Steingraber expressed optimism about the future adoption of in-kind deposits, their absence presents a hurdle for immediate arbitrage opportunities.
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The core justification for a high premium on an XRP ETF rests on the assumption of substantial institutional demand. However, this is an uncertain factor, as no asset manager has taken concrete steps toward launching an XRP ETF.
When asked, BlackRock CEO Larry Fink refused to comment on it, despite rumors of a possible BlackRock XRP ETF filing. Additionally, the U.S. Securities and Exchange Commission (SEC) has yet to establish a clear regulatory framework for cryptocurrency ETFs in general. These uncertainties cloud the likelihood of significant institutional investment materializing soon.
While Steingraber’s proposal has stimulated discussion, investors should exercise caution. The approval timeline for an XRP ETF remains unclear and hinges on the SEC’s stance on cryptocurrency ETFs. Although Bitcoin ETFs were approved in January, Ethereum ETFs are still a topic of debate, and the regulator’s stance could shift.
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