<img src="https://cryptoslate.com/wp-content/uploads/2024/06/ethereum-etf-.jpg” />
Bitwise CIO Matt Hougan has predicted that the impending ethereum spot exchange-traded funds (ETFs) will see a net flow of $15 billion in their first 18 months of trading.
Hougan shared this x.com/Matt_Hougan/status/1805941968838533534″>forecast on June 26, basing his prediction on ethereum's market capitalization relative to bitcoin, data from international ETP markets, and the possible influence of the carry trade strategy.
However, he acknowledged the possibility of net outflows from eth ETPs after the initial launch, considering that traders involved in discount arbitrage aggressively redeem their positions in Grayscale ethereum Trust (ETHE). A similar trend was seen in Grayscale’s bitcoin Trust when the bitcoin ETFs were launched in January.
Despite this, Hougan believes that ethereum ETPs will be successful because the underlying asset is one of the best-performing assets of all time.
Relative size of btc and eth
The Bitwise CIO explained that he expects investors to allocate funds to spot bitcoin and ethereum ETFs in proportion to their market capitalizations, which currently stand at $1.26 trillion and $432 billion, respectively. This suggests a weighting of around 74% for bitcoin ETFs and 26% for ethereum ETFs.
Hougan added that assets under management (AUM) of US spot bitcoin ETFs should rise to at least $100 billion by the end of 2025 as these products mature and gain approval on platforms like Morgan Stanley. .
With this in mind, Hougan stated that ethereum ETFs must attract $35 billion in 18 months to reach parity. However, when the $10 billion AUM of the Grayscale ethereum Trust is removed, the figure drops to $25 billion.
ETP International
Hougan noted that data from the European bitcoin and ethereum ETP markets revealed AUM ratios of 78% for bitcoin and 22% for ethereum products. In Canada, these figures stood at 77% for bitcoin and 23% for ethereum.
According to him, the similarity in asset distribution between the two regions suggests that this distribution reflects the relative demand for bitcoin and ethereum among ETP investors. Hougan stated:
“The fact that the split is roughly in line with the relative market capitalization of the two assets increases my confidence that this type of breakdown reflects “normal” demand.
Using Europe's 22% market share as a proxy, Hougan adjusted its expected net flows from $25 billion to $18 billion.
carry trade
Hougan also highlighted “carry trade” as a major factor affecting ethereum ETF flows. A carry trade is a trading strategy in which investors arbitrage the difference between the spot and futures prices of an underlying asset.
The Bitwise CIO noted that around $10 billion of bitcoin ETF spot AUM is tied to this trading strategy. However, he doesn't expect ethereum spot ETFs to follow the same pattern because “the carry trade is not reliably profitable in eth for non-staked assets.”
He added that he does not expect carry trading to affect the AUM of ethereum spot ETFs. With this in mind, Hougan lowered his estimate of net inflows into ethereum spot ETFs to $15 billion.
According to:
“(This figure) would be a historic success (as) only four ETFs launched since January 2020 have gathered $15 billion in flows.”
