Markets
Bitwise CIO Bullish On Spot Ethereum ETFs: Predicts $15 Billion Inflows
In a significant development for the cryptocurrency market, asset managers are eagerly preparing for the launch of new spot Ethereum ETFs, awaiting approval of the US Securities and Exchange Commission (SEC).
Bitwise Chief Investment Officer (CIO) Matt Hougan assessed the potential of these ETFs, predicting substantial inflows into the regulated market within the first few months of trading.
Market Data Suggests $15 Billion Demand for Spot Ethereum ETFs
Hougan’s projections they are based on an exhaustive analysis of available data. He emphasizes that there is no need for speculation when estimating demand for spot Ethereum ETFs. Instead, Hougan points to existing market data to support his forecast of $15 billion in net inflows during 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, he expects investors to allocate Bitcoin and Ethereum exchange-traded products (ETPs) roughly in proportion to their market capitalizations.
Bitcoin’s market cap is currently $1.266 billion, representing 74% of the combined market, while Ethereum’s market cap is $432 billion, representing 26% of the combined market.
Considering that US investors already have around $56 billion invested in Bitcoin ETPs in cash, Hougan anticipates reaching $100 billion or more by the end of 2025 as these ETFs mature and gain approval on prominent platforms such as Morgan Stanley and Merrill Lynch.
Using this $100 billion benchmark, he suggests that spot Ethereum ETFs would need to attract $35 billion in assets to reach parity, which he estimates will take approximately 18 months.
However, Hougan acknowledges that actual flows may differ due to a number of factors. For example, the Ethereum Trust in Grayscale (ETHE) is expected to convert to ETP on launch day, bringing with it $10 billion in assets. Taking this into account, the estimated net inflows to reach parity would be around 25 billion dollars.
Analysis of international ETF markets
To validate his estimates, Hougan analyzes international ETF markets, especially 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 approximately 78% and Ethereum ETPs representing approximately 22% of total assets under management (AUM). This alignment with market value the damage strengthens Hougan’s previous estimate.
Hougan also considers the potential impact of carry trading on the Bitcoin and Ethereum ETP markets. Although 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 carry trade-related AUM of $10 billion when sizing the Bitcoin market, leading to a revised estimate of $15 billion in net inflows for Ethereum ETPs.
In short, 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 demand for spot Ethereum ETFs over the next 18 months is a reasonable projection.
At the time of writing, ETH is trading at $3,405, up nearly 3% in the last 24 hours, after hitting a low of $3,230 on Monday.
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