U.S. Ethereum spot ETFs could attract between $3.1 billion and $4.8 billion in net inflows in the first five months of trading, according to cryptocurrency research firm K33 Research. K33 senior analyst Vetle Lunde and DeFi analyst David Zimmerman said in a report distributed on Tuesday (4th) that their estimate is based on a market size comparison between Bitcoin (BTC) and Ethereum (ETH) .
According to analysts, approximately 3.3% of the circulating supply of Ethereum currently resides in investment vehicles, continuing a steady downward trend since the peak of the last crypto bull market in November 2021. The trend is similar to what happened with Bitcoin, where the circulating supply of Bitcoin held in investment vehicles fell to 4.1% before the rush to launch Bitcoin spot ETFs, before growing to 5.6%.
The analysts added that globally, existing Ethereum ETPs have approximately 28.2% of the assets under management of their Bitcoin counterparts (excluding U.S. Bitcoin Spot ETFs), while in Canada and Europe the ratio is approximately 33%. While the U.S.-based Ethereum futures ETF lowered this global share, accounting for just 5% of its Bitcoin futures ETF, analysts believe this is due to a mismatch in the timing of their respective launches and is not representative of investment demand.
The analyst added:
“CME’s ETH open interest (OI) currently accounts for 22.9% of BTC size, and has averaged 35% of BTC futures since its launch, indicating that institutional demand for ETH in the United States is significant, which strengthens futures ETFs are unrepresentative outliers.”
Applying these comparable market weights to the Bitcoin spot ETF’s combined net inflows of $14 billion since its January launch, K33’s estimates suggest that the Ethereum spot ETF could accumulate between 800,000 and 1.26 million ether in its first five months coins, equivalent to 0.7% to 1.05% of the circulating supply of Ethereum.
Analysts at K33 added that based on the strong relationship between Bitcoin ETF flows and returns throughout the year, such a large supply absorption could lead to higher Ethereum prices.
Lack of staking mechanism won’t hinder demand
The U.S. Securities and Exchange Commission (SEC) approved a 19b-4 proposal related to Ethereum spot ETFs on May 23, bringing the potential listing of these funds one step closer. However, investors must still wait for SEC approval of the S-1 registration statement filed by the fund's issuer before they can begin trading such ETFs.
Ethereum spot ETFs will not generate staking reward benefits at launch, which appears to be a key factor in gaining SEC approval for these products. While some believe that the lack of staking functionality will lead to lower demand for Ethereum spot ETFs due to opportunity costs, K33 analysts disagree, saying:
“More than 98% of Ethereum ETF AUM in Europe and Canada is in non-collateralized ETPs, suggesting that lack of collateral is far from a critical barrier for ETP investors.”
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