Bitcoin, Ethereum ETF Divergence from Futures; Bracing for Next Catalyst

Jenny Kovacs (0:12)

Welcome back to Crypto Corner here on Schwab Network. I'm Jenny Kovacs, and joining me today is Adam Lynch, Director of Equity Research at Charles Schwab. Adam, appreciate you joining us today. Now we've seen a pretty strong run in both Bitcoin and Ethereum. So what do you think is driving crypto higher here, and what needs to happen for, of course, this rally to continue?

Adam Lynch (0:31)

Yeah. Hi, Jenny. It's great to see you again.

Excellent question. We have been sort of bouncing around here a little bit. It's been a pretty volatile month. Bitcoin is now trading around $81,000.

Back in September, it was down at $76,000, then it popped up to $87,000 or so in early October, back down to where we are today. Ethereum has been a little less volatile this month and is trading around $2,400 today. Now, it's been a pretty tough year for the major cryptos. Bitcoin is essentially down about 5% year to date, while Ethereum is actually off much worse. That one's down about 21% year to date. So what do we need to see in order to have these things essentially solidify here and then hopefully take off for the future? There's a couple of different things I think that we've got going on. We've got some pretty strong technical data that's out there. We're in a nice spot for the typical Bitcoin four year cycle. So there are a couple of positive things out there that hopefully we'll see come to fruition sometime here in Q4 or early next year.

Jenny Kovacs (1:37)

So SPOC crypto ETFs have also brought in some significant institutional interest. And so our flow is still holding up at these higher prices. And what should we really watch for next?

Adam Lynch (1:46)

Yeah, that's an interesting one. We've seen the flows hop around all year. I think it was just about two weeks ago where they went net positive year to date.

Now we're probably back down in the red. We had Bitcoin ETFs lose about 500 million the past seven days, while the Ethereum spot ETFs lost about 600 million over that same time period. Longer term, the picture is much more constructive. I mean, the products only launched, the Bitcoin ETFs launched back in January of 2024 It's just two and a half years or so now. They already have $60 billion of assets.

I don't think that the question is, have institutional investors found less demand, but I think it's rather have the way that they invest in these products changed. Because what we've seen particularly from the flow side of things is that they're much more tactical. Investors are moving big sums of money, millions and billions of dollars over short time periods, which is often easier and cheaper to do with these types of products. Then the other thing that we're seeing is just an expansion of all these different types of cryptocurrencies. It started as Bitcoin and Ethereum, but now we're tracking about 15 crypto assets these days from XRP, Solana, Hyperliquid, Dogecoin. There's a ton of them, and these products, the exchange-shaded products have essentially become a very important mechanism between traditional finance and crypto. I think we're moving from a Bitcoin, Ethereum ETF era into an overall crypto ETF era.

Jenny Kovacs (3:22)

Okay. Then between, say, Ethereum's evolving staking ecosystem and regulatory developments in Washington, although it's been a bit more quiet on that front, what do you see perhaps being the next major catalyst for the broader crypto market?

Adam Lynch (3:36)

Yeah, that's an excellent question. We had the Clarity Act fail, obviously. That was a little bit of a setback. Since then, we've seen the CFTC put forth a rulemaking process aimed at developing a tailored framework for certain crypto transactions. The SCC has put forth a few things. So we have seen a little bit of progress there, which I think could be a catalyst for future price movement. Ethereum in particular has some pretty interesting things going on. They're a proof of stake chain, which essentially allows you to generate rewards. So that means that their product development is essentially more focused on things besides the token's price. They're working on the economics and the underlying framework. Their next major upgrade comes here in Q4 of 2026

I like to think of Ethereum particularly as a financial infrastructure more or less, and now its developers are trying to make it faster and capable of handling more trading activity.

Jenny Kovacs (4:34)

Okay, and definitely a lot to keep on our radar here as a busy week this week, I'm sure we'll be busy in the coming weeks in regards to the entire equity market, but really appreciated Adam Lynch, Director of Equity Research at Charles Schwab. That's going to wrap up this edition of Crypto Corner. Subscribe to the Schwab Network YouTube channel for weekly episodes. I'm Jenny Kovacs. I'll see you again next time.