Ethereum ETFs to Raise $15 Billion in 18 Months, Bitwise Predicts

ethereum spot ETFs will amass more than $15 billion in net inflows within their first 18 months of hitting the US market, crypto asset manager Bitwise predicted on Wednesday.

The company's 1.5-year forecast would roughly match the net haul of bitcoin ETFs ($14.4 billion) since their launch five months ago, the enthusiasm for which has helped propel btc to new all-time highs.

Calculating ethereum ETF Flows

Bitwise CIO Matt Hougan based his x.com/Matt_Hougan/status/1805941968838533534″ data-wpel-link=”external” target=”_blank”>estimate on the bitcoin ETF numbers and compared ethereum to the overall bitcoin market size.

Currently, bitcoin's market cap is $1.26 trillion, compared to ethereum's $432 billion market cap, implying a 3:1 asset ratio. Of that bitcoin, $56 billion is locked in US bitcoin ETFs, which Hougan expects to increase to $100 billion by the end of 2025.

“By this logic, ethereum spot ETPs will need $35 billion in assets under management to reach parity,” he argued.

However, this figure does not imply $35 billion in tickets. First, Grayscale's ethereum Trust (ETHE) will immediately convert to an ETF on launch day with $10 billion up front, much like the Grayscale bitcoin Trust (GBTC) which converted to a fund with $30,000. million dollars in assets. With this in mind, Hougan lowers his estimate of ETF flows to $25 billion.

Still, the proportional differences between the sizes of bitcoin and ethereum ETPs in other jurisdictions are almost identical. In Europe, bitcoin ETPs hold €4.6 billion versus ethereum’s €1.3 billion. In Canada, bitcoin ETPs control CAD$4.9 billion, while ethereum-based funds hold CAD$1.4 billion.

“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,” Hougan wrote.

Assuming a conservative ratio of 78% btc, 22% eth as seen in Europe, this reduces Hougan's estimate to $18 billion for ethereum ETF inflows.

Cash and carry correction

The estimate should also correct the “carry trade” of the bitcoin ETF market, Hougan said.

In recent months, analysts have highlighted that many institutions buying bitcoin ETFs are simply doing a “cash and carry trade” to earn a risk-free return, by holding long positions in the spot market while shorting the the futures market. Since bitcoin futures typically have a long-term directional bias, returns are typically quite high for this trade.

However, Hougan said that ethereum base trading is “not reliably profitable enough” for non-stake assets, meaning ethereum ETFs will not generate demand for this reason. “Removing carry-trade assets from our model reduces our flow estimate from $18 billion to $15 billion,” she said.

With $15 billion in inflows, Hougan said the ethereum ETF would be a historic success. Only four ETFs launched since January 2020 have gathered inflows of that level.

“eth is one of the best-performing assets of all time and, in my honest opinion, its best days are ahead,” Hougan concluded.

In a research report published earlier this month, K33 Research predicted that ethereum ETFs would attract $4 billion in capital inflows in their first five months on the market. In March, Standard Chartered predicted that ETFs would raise $45 billion in capital inflows in their first 12 months.

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