The cryptocurrency market is poised for a significant shift as asset managers keenly await the launch of new spot Ethereum exchange-traded funds (ETFs), currently under consideration by the U.S. Securities and Exchange Commission.
Among the excited observers closely monitoring these developments is Bitwise’s Chief Investment Officer, Matt Hougan. Hougan does more than just watch in hopeful anticipation; he is predicting a considerable capital inflow into the regulated market just in the initial months following the launch.
He is not simply making projections out of the blue. Drawing on a comprehensive analysis of available data, he argues that there’s no space for conjecture when estimating the demand for spot Ethereum ETFs. He refers to existing market statistics to back his forecast of a whopping $15 billion flowing into these ETFs during the first one and a half years of trading.
This estimation emerges from comparing the market capitalizations of Bitcoin and Ethereum. At present, Bitcoin’s market cap is a hefty $1,266 billion, accounting for 74% of the total cryptocurrency market. Ethereum’s market cap of $432 billion, on the other hand, constitutes 26% of the combined market. These figures are factored into predicting the allocation of investments between Bitcoin and Ethereum ETPs.
Hougan contends that U.S. investors, who have already poured about $56 billion into spot Bitcoin ETPs, may see the numbers balloon to $100 billion or even more by the end of 2025 as these ETFs mature and gain approval on prominent platforms such as Morgan Stanley and Merrill Lynch.
In light of the $100 billion benchmark for Bitcoin investments, Ethereum ETFs must pull in $35 billion to achieve parity. Hougan believes this goal is feasible within an 18 month timeframe. However, the final influx may deviate due to factors like Grayscale Ethereum Trust, anticipated to convert to an ETP on the launch day ushering in $10 billion in assets. Including this conversion, the predicted net inflows to reach parity would be around $25 billion.
Additionally, Hougan refers to the international ETF markets in Europe and Canada for validation, both regions already offering Bitcoin and Ethereum ETFs. Here, the asset division mirrors the AUM split he projected, with Bitcoin ETPs constituting approximately 78% and Ethereum ETPs making up 22% of the total AUM.
The potential influence of the “carry trade” strategy on the Bitcoin and Ethereum ETP markets is another factor Hougan addresses, pointing out that while a large portion of U.S. Bitcoin ETP flows are linked to this strategy, the Ethereum ETP carry trade isn’t profitable for institutions. Taking into account this consideration, Hougan eliminates the $10 billion carry-trade-related AUM and presumes a revised estimate of $15 billion in net Ethereum ETP inflows.
Overall, Hougan’s calculations indicate that the figure of $15 billion in net new demand for spot Ethereum ETFs within the next 18 months is a reasonable assumption.
As these intriguing predictions and analyses surface, Ethereum is enjoying a boost in market performance. At the time of penning down this article, Ethereum was trading at $3405, up almost 3% in the last 24 hours. This surge followed Monday’s low of $3230, indicating a definite momentum and a promising future for Ethereum’s market presence.
