The cryptocurrency market is abuzz with excitement as asset managers gear up for the launch of new spot Ethereum ETFs, pending approval from the US Securities and Exchange Commission (SEC). Bitwise Chief Investment Officer (CIO) Matt Hougan has extensively analyzed the potential impact of these ETFs and predicts a significant influx of funds into the regulated market within the first few months of trading.
Hougan’s projections are not merely speculative but are grounded in a thorough analysis of available data. He expects $15 billion in net inflows during the initial 18-month period of trading for spot Ethereum ETFs, based on comparisons between the market capitalizations of Bitcoin (BTC) and Ethereum (ETH). With Bitcoin currently holding a market cap of $1,266 billion (74% of the combined market) and Ethereum at $432 billion (26% of the combined market), Hougan anticipates that investors will allocate funds to Bitcoin and Ethereum ETPs in proportion to their market capitalizations.
US investors already have around $56 billion invested in spot Bitcoin ETPs, and Hougan envisions this figure reaching $100 billion or more by the end of 2025 as these ETFs mature and gain approval on reputable platforms like Morgan Stanley and Merrill Lynch. To achieve parity with Bitcoin ETPs, spot Ethereum ETFs would need to attract $35 billion in assets, a target that Hougan estimates will take about 18 months to reach. However, he acknowledges that actual inflows may vary due to different factors at play.
To validate his estimates, Hougan looks at the international ETF markets, particularly in Europe and Canada, where Bitcoin and Ethereum ETFs have already been established. These markets show a similar asset split between the two cryptocurrencies, with Bitcoin ETPs representing approximately 78% and Ethereum ETPs around 22% of the total Assets Under Management (AUM). This alignment with market cap breakdowns further strengthens Hougan’s forecast for spot Ethereum ETFs.
Hougan also takes into account the potential impact of the “carry trade” on Bitcoin and Ethereum ETP markets. While a significant portion of US Bitcoin ETP flows are linked to the carry trade strategy, he notes that the Ethereum ETP carry trade is not as lucrative for institutional investors. By removing the $10 billion carry-trade-related AUM when sizing the Bitcoin market, Hougan revises his estimate to predict $15 billion in net inflows for Ethereum ETPs, maintaining a conservative outlook on the market.
The impending launch of spot Ethereum ETFs marks a significant development in the cryptocurrency market, with asset managers poised for substantial inflows into the regulated market. Hougan’s meticulous analysis and data-driven forecasts shed light on the potential growth and maturation of the market, providing valuable insights for investors navigating this evolving landscape.
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