Predicting Ethereum’s ETF Success: Bitwise’s Analysis
Bitwise, a crypto asset manager, recently forecasted that Ethereum spot ETFs are set to attract over $15 billion in net inflows within the initial 18 months of launching in the U.S. market. This prediction aligns with the success seen with Bitcoin ETFs, which accumulated $14.4 billion in the first five months post-launch, contributing to the surge in Bitcoin’s value to new record highs.
Estimating Ethereum ETF Flows
Bitwise CIO Matt Hougan made this estimation by comparing Ethereum’s market size with that of Bitcoin and analyzing Bitcoin ETF data. Currently, Bitcoin’s market cap stands at $1.26 trillion, while Ethereum’s is $432 billion, representing a 3:1 asset ratio. Of the total Bitcoin market, $56 billion is held in U.S. Bitcoin ETFs, a figure Hougan anticipates will reach $100 billion by the end of 2025.
- Ethereum ETF would need $35 billion in Assets Under Management (AUM) to achieve parity with Bitcoin ETFs.
- Upon launch, Grayscale’s Ethereum Trust (ETHE) will convert into an ETF with $10 billion, reducing the estimated ETF inflows to $25 billion.
- Market trends in Europe and Canada also show proportional differences between Bitcoin and Ethereum ETP sizes.
Adjusting for Cash And Carry Dynamics
When factoring in the Bitcoin ETF market’s “carry trade,” which involves leveraged positions in futures contracts, Hougan cautioned that Ethereum ETFs might not attract demand due to the lesser profitability in Ethereum’s basis trade compared to Bitcoin. This correction lowers the estimated ETF flows from $18 billion to $15 billion.
- Bitcoin futures’ directional long bias contributes to high yields on the cash and carry trade, unlike Ethereum’s less profitable setup.
- With $15 billion in inflows, an Ethereum ETF would mark a significant achievement, as only a few ETFs reached that level of success since 2020.
“ETH has been one of the top-performing assets in history, and I firmly believe its brightest days are yet to come,” Hougan expressed.
Recent research by K33 Research forecasted $4 billion in inflows for Ethereum ETFs in the first five months of market availability, while Standard Chartered suggested $45 billion in capital inflows within the initial year.
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