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ethereum (eth) exchange-traded products (ETPs) will attract $15 billion in net inflows within the first 18 months of their launch, according to Matt Hougan, chief investment officer (CIO) at Bitwise. In a recent ethereum-etps-will-attract-billions” target=”_blank” rel=”noopener nofollow noreferrer”>reportHougan stressed that bitcoin and ethereum ETPs should capture net inflows comparable to their market capitalization, with eth garnering 26% of the combined market.
Currently, US investors own approximately $56 billion worth of bitcoin ETPs, and Bitwise's CIO expects them to surpass $100 billion by 2025. ethereum's market capitalization, which stands at $432 billion, suggests substantial potential for asset inflows, aiming to achieve parity with bitcoin ETPs. around 35 billion dollars.
“To start, Grayscale ethereum Trust (NYSE: ETHE) is expected to become an ETP on launch day, bringing with it $10 billion in assets. If that is eliminated, we have $25 billion in inflows left to reach parity,” he highlighted in the report.
However, Hougan points to the fact that ethereum ETPs are slightly underperforming their absolute market cap weighting, currently holding between 22% and 23% of total assets under management versus a weighting of market capitalization of 26%.
“I can imagine several reasons, including that bitcoin ETPs came to many of these markets first (as they did in the US). Some investors may have bought a bitcoin ETP and stopped there, thinking their cryptocurrency exposure was covered. I suspect this dynamic will be true in the US as well,” he added.
Hougan therefore lowered his expectations from $25 billion to $18 billion, excluding the assets held by Grayscale's trust.
In addition, the Bitwise CIO takes into account another factor: the carry trade, which consists of buying bitcoin ETPs in spot and selling bitcoin futures contracts against that position, and traders benefit from the premium between futures prices and cash.
“I don't expect ethereum to have the same dynamic: the ethereum ETP carry trade is not profitable at this time for institutions (partly because US ethereum ETPs will not participate in staking their assets). For that reason, and to keep my estimate of ethereum ETP flows on the conservative side, we need to eliminate the $10 billion in carry-trade-related AUM when sizing the bitcoin market.”
As a result, bitcoin's initial denominator of $100 billion falls to $90 billion, and the adjusted estimate of net inflows into ethereum ETPs becomes $15 billion.
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