In a promising turn of events for the cryptocurrency market, asset managers are eagerly anticipating 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 shared his insights on the potential of these ETFs, foreseeing significant inflows into the regulated market within the first few months of trading. Hougan’s projections are not mere speculations, but rather based on a thorough analysis of available data.
Hougan takes into account the market capitalizations of both Bitcoin (BTC) and Ethereum (ETH) to arrive at his estimates. With Bitcoin’s market cap standing at $1,266 billion and Ethereum’s market cap at $432 billion, he expects investors to allocate to Bitcoin and Ethereum ETPs in proportion to their market capitalizations.
Based on his analysis, Hougan predicts $15 billion in net inflows for spot Ethereum ETFs during the initial 18-month period. He further anticipates that these ETFs will reach $100 billion or more by the end of 2025 as they gain approval on major platforms like Morgan Stanley and Merrill Lynch.
International Comparison and Market Alignment
Hougan also considers the ETF markets in Europe and Canada, where Bitcoin and Ethereum ETFs are already available. He notes that the asset split between the two cryptocurrencies in these markets aligns closely with their respective market cap breakdowns, reinforcing his earlier estimates.
While discussing the potential impact of the “carry trade” on Bitcoin and Ethereum ETP markets, Hougan highlights the differences between the two. While a significant portion of US Bitcoin ETP flows are linked to the carry trade strategy, the same does not hold true for Ethereum ETPs due to lack of profitability for institutions.
Revised Estimate and Final Thoughts
To ensure a conservative estimate, Hougan adjusts his calculations by removing the $10 billion carry-trade-related AUM from the Bitcoin market. This leads to a revised estimate of $15 billion in net inflows for Ethereum ETPs, emphasizing the need for caution when making forecasts in the ever-evolving cryptocurrency market.
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