Bitwise Exec Bullish On Spot Ether ETFs: Predicts $15 Billion Inflows In First 18 Months
Once launched, U.S.-listed spot Ethereum (ETH) exchange-traded funds (ETFs) will gather $15 billion of net inflows during the first 18 months, CIO Matthew Hougan of the crypto fund manager Bitwise forecasted.
$15B Windfall Anticipated For Ethereum ETFs
As the crypto market awaits the U.S. Securities and Exchange Commission’s full approval of spot ether exchange-traded fund applications, analysts are predicting that the ETH ETFs may see well over $15 billion in inflows by the end of 2025.
In a Tuesday report, Bitwise CIO Matt Hougan said he expects institutional investors to allocate toward spot Bitcoin and Ethereum ETFs in proportion to their relative market capitalization; $1.2 trillion and $407 billion. That would represent a weighting of roughly 75% for the spot Bitcoin ETFs and 25% for their Ether peers.
With over $55 billion in assets currently held by U.S. investors via spot BTC ETFs since their launch in January, Hougan anticipates this to grow to around $100 billion by 2025-end as the products mature and get approved for trading on large warehouses such as Morgan Stanley and Merrill Lynch.
The Bitwise executive posited that, taking that $100B as the starting point, the spot ETH ETFs would need to draw in $25 billion within 18 months to reach parity, excluding the expected $10 billion in assets the converted Grayscale Ethereum Trust will bring upon launch.
Hougan observes that Ethereum ETPs are underperforming their absolute market cap weight, as they are presently attracting 22-23% of total assets under management versus a 26% market cap weighting.
“I can imagine various reasons, including that Bitcoin ETPs arrived first in many of these markets (as they did in the U.S.). Some investors may have bought a Bitcoin ETP and stopped there, thinking their crypto exposure was covered. I suspect this dynamic will be true in the U.S. as well,” he explained.
Hougan also considered the Bitcoin “carry trade.” A carry trade is a strategy in which investors buy spot Bitcoin ETPs and sell CME Bitcoin futures contracts against that position to profit from the premium between the futures and spot prices.
As per Hougan’s analysis, roughly $10 billion of spot BTC ETF AUM is linked to this carry trade. Notably, he doesn’t expect the spot Ether ETFs to display the same dynamic and thinks it should be deducted from the calculations.
“I don’t expect Ethereum will have the same dynamic — the Ethereum ETP carry trade isn’t profitable right now for institutions (in part because U.S. Ethereum ETPs won’t engage in staking their assets). For that reason — and to keep my estimate of Ethereum ETP flows on the conservative side — we need to remove the $10 billion in carry-trade-related AUM when sizing the Bitcoin market.”
Combining all these factors, Bitwise’s Hougan lowered its estimate for Ethereum ETPs’ net inflows to $15 billion. Nonetheless, he still believes $15B in new demand will still have a huge impact on the Ether market.
Bitwise is one of 10 spot Bitcoin ETF issuers. The asset management firm has also submitted paperwork with the U.S. Securities and Exchange Commission to list a spot Ether ETF.
