• Ethereum ETFs face lower demand due to a distinct investor base and institutional hesitance.

  • Bitcoin’s structural advantages, like institutional backing, may not translate to Ethereum.

  • Lower open interest on CME suggests less TradFi engagement with ETH compared to BTC.

While Bitcoin ETFs have seen significant inflows, the potential impact of Ethereum ETFs remains uncertain, with analysts predicting lower demand due to Ethereum’s unique investor base and weaker institutional interest.

As highlighted by analyst Andrew Kang, while Bitcoin ETFs have accumulated $50 billion in Assets Under Management (AUM), the true net inflows are approximately $5 billion after accounting for delta-neutral flows and spot rotation.

https://t.co/On2KWjAlLx

— Andrew Kang (@Rewkang) June 23, 2024

Bitcoin is increasingly viewed as a macro asset, appealing to institutions like macro funds, pensions, and sovereign wealth funds. Ethereum, in contrast, is more of a tech asset, attracting venture capitalists, crypto funds, technologists, and retail investors with easier access to crypto. This fundamental difference affects the potential inflows and impact of an ETH ETF.

Based on the experience with Bitcoin ETFs, industry experts like Eric Balchunas estimate that ETH flows could be around 10% of BTC’s. This translates to true net buying flows of about $0.5 billion within six months and reported net flows of $1.5 billion. While Balchunas may have been off in his approval odds, his lack of interest in ETH ETFs reflects broader TRADitional Finance (TradFi) sentiment.

An adjusted analysis, accounting for Ethereum’s market cap (about 33% of Bitcoin’s) and an access factor of 0.5, suggests that true net buying could be around $0.84 billion, with reported net flows of $2.52 billion. Optimistically, true net buying might reach $1.5 billion, with reported net flows of $4.5 billion, roughly 30% of Bitcoin’s flows. However, these figures are still significantly lower than the derivative flows front-running the ETF launch, estimated at $2.8 billion, excluding spot front-running.

Furthermore, Ethereum’s open interest (OI) on CME is significantly lower than Bitcoin’s, indicating less interest from traditional finance. Before the ETF launch, ETH’s OI was 0.30% of its supply, compared to BTC’s 0.6%. This suggests that TradFi money is less inclined towards an ETH ETF, possibly due to weaker flow intelligence.

Bitcoin’s rise from $40,000 to $65,000 was fueled by various structural accumulators and other buyers in the spot market. Bitcoin has established itself as a key portfolio asset globally, with significant holdings by entities like MicroStrategy, Tether, and family offices. In contrast, Ethereum lacks the same level of structural support.

The post Bitcoin ETFs vs. Ethereum ETFs: Why the Excitement Isn’t the Same appeared first on Coin Edition.