The recent approval of spot Ethereum ETFs by the Securities and Exchange Commission (SEC) could attract $15 billion in inflows, according to Matt Hougan, chief information officer at asset manager Bitwise. With such volumes, these new financial products, available from July 4, could follow the success of spot Bitcoin ETFs and significantly influence the price of Ether.
$15 billion coming into Ethereum
In January 2024, the Securities and Exchange Commission (SEC) approved the first 10 Bitcoin spot ETFs in the United States, making BTC investment more accessible to professional and institutional investors.
These new financial products marked the best ETF launch in history. Five months later, they total more than $300 billion in cumulative volume, including $15 billion in net inflows. These inflows have greatly benefited the price of BTC, which rose from $45,500 at launch to $73,750 two months later.
A few weeks ago, the SEC approved the first six Ethereum spot ETFs in the United States, which are expected to be available for trading on July 4.
These Ether-backed spot ETFs are raising questions among crypto enthusiasts about their impact on the price of Ether and the possibility that they will follow the same trajectory as Bitcoin ETFs.
According to Matt Hougan, chief information officer at asset manager Bitwise, Ethereum spot ETFs are expected to attract $15 billion in their first 18 months on the market.
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
“Ethereum ETFs will attract $15 billion in inflows during their first 18 months on the market. A thread on how I arrived at this estimate.”
Although this estimate corresponds precisely to the performance of Bitcoin spot ETFs during their first 5 months, if it comes true, volumes on Ether would therefore be lower than those on Bitcoin, but could nevertheless push cryptocurrency prices higher in the coming months.
What is the methodology behind this estimate?
To arrive at this estimate, Matt Hougan first looked at the market capitalization of the two cryptocurrencies: $1.266 trillion for Bitcoin and $432 billion for Ethereum at the time his data was published. Together, they have a total market capitalization of $1.698 trillion, with Ethereum accounting for 26% of this total and Bitcoin 74%.
In addition, Matt points out that Bitcoin and Ethereum ETF capital in Canada and Europe is distributed similarly:
- Europe: Bitcoin 78% / Ethereum 22%;
- Canada: Bitcoin 77% / Ethereum 23%.
Based on these figures, he determines that the distribution between the two assets will be similar in the United States, with Ethereum spot ETFs representing between 22% and 26% of the assets under management (AUM) of Bitcoin spot ETFs.
However, it is important to note that this market share could change if Ether outperforms BTC.
Thus, taking into account this capital allocation, the $10 billion in Ether already held by Grayscale’s ETHE trust, and estimating that spot Bitcoin ETFs could reach up to $100 billion in AUM by 2025, Matt Hougan estimates that Ethereum spot ETFs could see $15 billion in volume over the next 18 months.
In conclusion, Matt Hougan points out that such a performance would be unprecedented, given that only four ETFs have attracted $15 billion since January 2020.
