In a recent discussion, Bitwise’s Chief Investment Officer (CIO) Matt Hougan shared insights on the potential inflows that US Spot Ethereum ETFs could attract. According to him, these funds could record a significant $15 billion in net inflows within their first 18 months of trading. This estimate was based on a careful analysis of various factors rather than being a mere speculation.
Hougan highlighted the market capitalizations of Bitcoin and Ethereum to justify his predictions. He pointed out that investors are likely to allocate funds to exchange-traded products (ETPs) in proportion to the market cap of these cryptocurrencies. With US investors already committing $56 billion to Spot Bitcoin ETPs, Hougan expects this figure to exceed $100 billion by the end of 2025.
Asset Allocation and Conversion
To match the performance of Bitcoin ETFs, Hougan suggested that Spot Ethereum ETFs would need to attract $35 billion in assets, a milestone that could take around 18 months to achieve. He also noted that the launch of Spot Ethereum ETFs would be bolstered by the conversion of assets from the Grayscale Ethereum Trust (ETHE), which would bring in an initial $10 billion in assets.
International ETP Markets Overview
Drawing on data from international ETP markets, Hougan pointed out that investors tend to allocate funds to Bitcoin and Ethereum ETPs based on their market caps. For instance, European Bitcoin and Ethereum ETPs hold significant assets under management (AuM), with a distribution of 78% and 22% respectively. A similar trend is observed in Canadian ETP markets, further reinforcing the notion that investors align their investments with market cap proportions.
Taking into account Ethereum’s ETP market share in Canada, Hougan adjusted his estimate for the US Spot Ethereum ETFs, lowering the projected net inflows from $25 billion to $18 billion. By factoring in the influence of carry trades, which contribute significantly to flows into Spot Bitcoin ETFs, Hougan eventually settled on a conservative estimate of $15 billion for the net inflows of US Spot Ethereum ETFs.
The predictions made by Bitwise’s CIO Matt Hougan shed light on the potential inflows that US Spot Ethereum ETFs could attract in the coming months. While his initial estimate of $25 billion was scaled back to $15 billion after careful consideration of various factors, it underscores the growing interest and investment opportunities in the cryptocurrency market. As these ETFs continue to evolve and gain traction, it will be intriguing to see how investors respond and allocate their funds in the dynamic landscape of digital assets.