In a significant development for the cryptocurrency market, asset managers are eagerly preparing 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 weighed in on the potential of these ETFs, predicting substantial inflows into the regulated market within the first months of trading.
Market Data Suggests $15B Demand For Spot Ethereum ETFs
Hougan’s projections are based on a thorough analysis of available data. He emphasizes that there is no need for speculation when estimating the demand for spot Ethereum ETFs. Instead, Hougan points to the 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 to Bitcoin and Ethereum exchange-traded products (ETPs) roughly in proportion to their market capitalizations.
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Bitcoin’s market cap currently stands at $1,266 billion, representing 74% of the combined market, while Ethereum’s market cap is $432 billion, accounting for 26% of the combined market.
Considering US investors already have around $56 billion invested in spot Bitcoin ETPs, 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 achieve parity, which he estimates will take approximately 18 months.
However, Hougan acknowledges that the actual inflows may differ due to various factors. For instance, the Grayscale Ethereum Trust (ETHE) is expected to convert to an ETP on the launch day, bringing along $10 billion in assets. Factoring this in, the estimated net inflows to reach parity would be around $25 billion.
Analysis Of International ETF Markets
To validate his estimates, Hougan looks at international ETF markets, particularly 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 accounting for approximately 78% and Ethereum ETPs representing around 22% of the total Assets Under Management (AUM). This…
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