Matt Hougan, founder of ETF issuer Bitwise, speculates that an Ethereum spot ETF will attract $15 billion in inflows within 18 months of listing.
1/ Ethereum ETPs will attract $15 billion in net flows in their first 18 months on the market.A thread on how I get to this estimate.
— Matt Hougan (@Matt_Hougan) June 26, 2024
Bitwise’s estimation method
Here’s how Bitwise estimates Ethereum spot ETF flows
Rough estimate based on Bitcoin/Ethereum market capitalization
The starting point for estimating flows is the relative market cap sizes of BTC and ETH.
BTC: $1,266 billion (74%)
ETH: $432 billion (26%)
U.S. investors have invested $56 billion in Bitcoin spot ETFs. Hougan estimates that by the end of 2025, as these commodities gradually mature and are approved on platforms such as Morgan Stanley, this number will reach 100 billion U.S. dollars, and at this ratio, the asset management scale of Ethereum spot ETF will reach 350 One hundred million U.S. dollars.
Assets net of ETHE
But Grayscale’s Ethereum Trust ETHE will convert $10 billion in assets directly into an ETF, and net inflows after deductions should be $25 billion.
Comparing this to European and Canadian figures, Bitcoin and Ethereum’s shares appear to be not too far apart.
However, Hougan still chose to use a conservative estimate of 22% of the market share in Europe and lowered the net inflow from US$25 billion to US$18 billion.
Assets net of carry trades
There's another major factor to consider: arbitrage trading. The U.S. Bitcoin spot ETF may have up to $10 billion in assets tied to the arbitrage trade, with institutional investors buying the ETF and selling BTC futures contracts on CME.
(Bitcoin ETF has continued net inflows but has not risen? CME short arbitrage has reached a new high, and they are not here to buy coins)
However, considering that the ether held by the Ethereum spot ETF cannot be pledged, Hougan predicts that such arbitrage transactions will not occur in the Ethereum spot ETF, so he revised down the US$18 billion to US$15 billion.
$15 billion is still a huge success story
Hougan believes this will be a historic success story. Because only four ETFs have received $15 billion in inflows since January 2020. However, he does not believe that the inflow of funds is linear. Instead, there may be a net outflow due to the redemption of ETHE when it was first launched. But Hougan considers ETH to be one of the best-performing assets of all time and believes its best days are ahead of it.
Previous analysis by Bitfinex, using the example of gold and silver ETFs, estimated that the Ethereum spot ETF has the opportunity to capture 10-20% of the funds currently flowing into Bitcoin ETFs. Bloomberg ETF analyst Eric Balchunas estimated the performance of Ethereum spot ETFs. About 10% of Bitcoin spot ETFs have performed very well.
(Ethereum is digital silver, and the Ethereum spot ETF will attract 10% of Bitcoin ETF funds)
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