Bitwise CIO: Ethereum ETFs Can Attract $15 Billion
27 Jun, 2024 ● Crypto people
The crypto community is keenly anticipating the introduction of spot Ethereum exchange-traded funds (ETFs) in the United States, with many analysts predicting they will draw substantial investment.
Matt Hougan, the chief investment officer at Bitwise, is particularly optimistic about the potential of these investment products.
He forecasts significant inflows into spot Ether ETFs in the early stages of their trading.
“Ethereum ETPs will attract $15 billion in net flows in their first 18 months on the market,” Hougan stated in his June 26 X post analysis.
Hougan’s prediction of $15 billion is derived from a detailed analysis of several factors including Ether’s market cap relative to that of Bitcoin, the global crypto ETP market, the conversion of Grayscale’s Ethereum Trust to an ETF, and the dynamics of the spot Bitcoin ETFs’ “carry trade.”
He anticipates that investments in Bitcoin and Ethereum ETFs will mirror their respective market capitalizations:
“Absent other information, I’d expect investors to allocate to BTC and ETH ETPs roughly in line with their market caps: BTC: $1.266 billion (74% of the market) and ETH: $432 billion (26% of the market).”
It’s important to note that these percentages are calculated based solely on the market capitalization of the two leading cryptocurrencies.
“U.S. investors have $56 billion invested in spot Bitcoin ETPs,” explained Hougan.
He expects this amount to grow to $100 billion by the end of 2025 as these ETFs mature and gain approval on major platforms like Morgan Stanley.
Considering $100 billion as a benchmark and subtracting the $10 billion from Grayscale’s Ethereum Trust's conversion to an ETF, Hougan estimates that spot Ethereum ETFs could experience net inflows of $25 billion.
To further substantiate this figure, he compared it with ETF markets in Canada and Europe, finding that investment distribution between Bitcoin and Ethereum ETPs is similar in these regions, with Bitcoin ETPs holding about 78% and Ethereum ETPs around 22% of total assets under management (AUM).
Hougan notes, “The fact that the asset splits are nearly identical across the two geographies suggests to me that this split broadly captures the relative demand for BTC and ETH among ETP investors.”
Given that international Ethereum ETFs capture only about 22% of the combined market share relative to Bitcoin, he adjusted the initial estimate down from $25 billion to $18 billion.
Addressing the potential for a “carry trade,” Hougan expressed doubt that institutions would engage in such activities with Ethereum as they do with Bitcoin ETFs, due to the lack of staking options in U.S. spot Ethereum ETFs.
A carry trade typically involves buying an asset in the spot market while simultaneously shorting it in the futures market to capitalize on discrepancies between the futures contract price and the spot price.
Adopting a conservative approach, Hougan deducted the $10 billion attributed to carry-trade-related AUM in the Bitcoin market, revising the Ethereum ETP net inflow estimate down to $15 billion by the end of 2025.
He concluded, “I think ETH ETPs are going to be a big success. At least, that’s what the data tells me.”
As the regulatory process moves forward following the SEC’s approval on May 23, prospective issuers of spot Ethereum ETFs are finalizing their registrations.
According to Bloomberg ETF analyst Eric Balchunas, these ETFs could begin trading in the U.S. by July 2.
On June 25, VanEck took a significant step toward launching its spot Ether ETF by filing a Form 8-A with the SEC.
Recent data from IntoTheBlock indicates that Ethereum is finding support around the $3,300 price zone
The In/out of the Money Around Price (IOMAP) model, which indicates buying activity within specific price ranges, shows substantial purchases between $3,257 and $3,557, involving around 1.4 million ETH by approximately 2.73 million addresses.
On the ETH/USD weekly chart, the 20-week exponential moving average (EMA) aligns with this support zone, strengthening the bullish defense.
Additionally, the relative strength index remains positive, above the midline, and the price strength at 55 suggests that market conditions still favor an upward trend.
Sources:
https://cointelegraph.com/news/ethereum-spot-etfs-could-attract-15b-by-end-of-2025-bitwise-cio
https://x.com/Matt_Hougan/status/1805941968838533534
https://x.com/Matt_Hougan/status/1805941971413815606
