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Ether Spot ETFs to Attract $15B of Net Inflows in First 18 Months: Bitwise
Investors are likely to allocate funds to ETFs in proportion to the relative market caps of bitcoin and ether, the report said.
Updated Jun 26, 2024, 10:27 a.m. Published Jun 26, 2024, 10:24 a.m.
- Ether spot ETFs are likely to attract $15 billion of net inflows in the first 18 months, Bitwise CIO Matt Hougan wrote.
- Potential inflows can be estimated by comparing the relative market caps of bitcoin and ether, the report said.
- Bitcoin benefits from first-mover advantage, which may reduce the inflows into spot ether ETFs.
Ether spot exchange-traded funds (ETFs), which are expected to be approved for trading in the U.S. in coming months, are likely to attract $15 billion of net inflows in their first 18 months, Bitwise chief investment officer Matt Hougan wrote in a report on Monday.
One way to estimate potential inflows is to consider the relative market caps of bitcoin and ether, the report said. Bitcoin is currently 74% of the combined market value, the report noted. Investors will probably allocate to bitcoin and ether ETFs in the same proportions.
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U.S. investors have invested $56 billion in spot bitcoin ETFs since their introduction in January, a number that is expected to grow to $100 billion or more by the end of 2025 as large wirehouses approve the products for trading on their platforms, the asset manager said.
“Using this $100 billion figure as a reference, spot ether ETPs would need to attract $35 billion in assets to reach parity, a process I expect will take about 18 months,” Hougan wrote.
The Grayscale Ethereum Trust (ETHE), with $10 billion in assets under management (AUM), is expected to convert to a spot ETF, leaving $25 billion of inflows to reach parity.
In Canada, however, ether ETPs account for only 22%-23% of total AUM “slightly underperforming their absolute market cap weight,” the report noted. The discrepancy can be linked to bitcoin’s first-mover advantage, Hougan wrote.
“Some investors may have bought a bitcoin ETP and stopped there, thinking their crypto exposure was covered,” the report said, adding that this dynamic may be true in the U.S. also. Assuming ether ETFs only capture 22% of the market, as in Canada, cuts the estimate of net new inflows to $18 billion, and other factors chop off another $3 billion.
Read more:Ether Spot ETFs Could See Lower Demand Compared to Bitcoin Peers: Bernstein
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