In a significant development for the cryptocurrency market, asset managers are eagerly preparing for the launch of new ethereum spot ETFs, pending approval from the United States Securities and Exchange Commission (SEC).
Bitwise Chief Investment Officer (CIO) Matt Hougan has weighed in on the potential of these ETFs and predicts substantial inflows into the regulated market during the first few months of trading.
Market Data Suggests $15 Billion Demand for ethereum Spot ETF
Hougan's ethereum-etps-will-attract-billions” target=”_blank” rel=”nofollow”>projections They are based on a thorough analysis of the available data. He highlights that there is no need to speculate when estimating demand for ethereum spot ETFs. Instead, Hougan points to existing market data to support his forecast of $15 billion in net inflows over the initial 18-month period.
To arrive at this estimate, Hougan compares the relative market capitalizations of bitcoin (btc) and ethereum (eth). As a starting point, expect investors to allocate bitcoin and ethereum exchange-traded products (ETPs) roughly in proportion to their market caps.
Related reading
bitcoin's market capitalization currently stands at $1.266 billion, representing 74% of the combined market, while ethereum's market capitalization is $432 billion, representing 26% of the combined market. .
Considering that US investors already have around $56 billion invested in spot bitcoin ETPs, Hougan anticipates reaching $100 billion or more by the end of 2025 as these ETFs mature and gain approval on platforms. prominent companies such as Morgan Stanley and Merrill Lynch.
Using this $100 billion benchmark, he suggests that ethereum spot ETFs would need to attract $35 billion in assets to achieve parity, which he estimates will take approximately 18 months.
However, Hougan acknowledges that actual entries may differ due to several factors. For example, him ethereum Trust in Grayscale (ETHE) is expected to become an ETP on launch day, bringing in $10 billion in assets. Taking this into account, the estimated net inflows to reach parity would be around $25 billion.
Analysis of international ETF markets
To validate his estimates, Hougan analyzes international ETF markets, particularly Europe and Canada, which already offer bitcoin and ethereum ETFs.
The asset split between the two cryptocurrencies in these markets is similar, according to Hougan, with bitcoin ETPs representing about 78% and ethereum ETPs about 22% of total assets under management (AUM). This alignment with Market cover The breakdowns reinforce Hougan's previous estimate.
Hougan also considers the potential impact of the “carry trade” on the bitcoin and ethereum ETP markets. While a significant fraction of US bitcoin ETP flows are tied to the carry trade strategy, he highlights that the ethereum ETP carry trade is not profitable for institutions.
To maintain a conservative estimate, Hougan removes the $10 billion of AUM related to carry-trading when sizing the bitcoin market, leading to a revised estimate of $15 billion in net receipts for ethereum ETPs.
Related reading
In summary, Hougan believes that while there are several factors to consider and possible adjustments to the model, a starting point of $15 billion in net new ethereum spot ETF demand within the next 18 months is a reasonable projection.
At the time of writing, eth was trading at $3,405, up almost 3% in the last 24 hours, after hitting a low of $3,230 on Monday.
Featured image of DALL-E, chart from TradingView.com
