Ethereum
Bitwise CIO Predicts $15 Billion Inflow into Ethereum ETFs Despite Possible Grayscale Outflows
Bitwise CIO Matt Hougan predicted the impending spot Ethereum Exchange-traded funds (ETFs) will see a net inflow of $15 billion in their first 18 months of trading.
Hougan shared this forecast on June 26, basing his prediction on Ethereum’s market capitalization relative to Bitcoindata from international ETP markets and the potential influence of the carry trade strategy.
He did, however, acknowledge the possibility of net outflows from ETH ETPs after the initial launch, as traders involved in rebate arbitrage aggressively buy back their positions from Grayscale Ethereum Trust (ETHE). a similar trend was observed of Grayscale’s Bitcoin Trust when it launched Bitcoin ETFs in January.
Despite this, Hougan believes that Ethereum ETPs will succeed because the underlying asset is one of the best performing assets ever created.
Relative size of BTC and ETH
Bitwise’s CIO explained that he expects investors to allocate funds to spot Bitcoin and Ethereum ETFs in proportion to their market caps, which currently stand at $1.26 trillion and $432 billion, respectively. This suggests a weighting of around 74% for Bitcoin ETFs and 26% for Ethereum ETFs.
Hougan strengthened this American position Bitcoin ETF Assets Under Management (AUM) is expected to grow to at least $100 billion by the end of 2025, as these products mature and are approved on platforms like Morgan Stanley.
Given this, Hougan said Ethereum ETFs need to attract $35 billion in 18 months to reach parity. However, when Ethereum Trust in Grayscale $10 billion in assets under management are eliminated, the figure drops to $25 billion.
International FTE
Hougan noted that data from the European Bitcoin and Ethereum ETP markets revealed assets under management ratios of 78% for Bitcoin and 22% for Ethereum Products. In Canada, these figures rise to 77% for Bitcoin and 23% for Ethereum.
According to him, the similarity in asset allocations between the two regions suggests that this distribution reflects the relative demand for Bitcoin and Ethereum among ETP investors. Hougan said:
“The fact that the allocation roughly matches the relative market capitalization of the two assets reinforces my confidence that this type of allocation reflects ‘normal’ demand.”
Using the 22% European market share as a proxy, Hougan adjusted its expected net flows from $25 billion to $18 billion.
Porterage business
Hougan also highlighted “carry trade” as an important factor impacting Ethereum ETF flows. A trading is a trading strategy in which investors arbitrage the difference between the spot and futures prices of an underlying asset.
The Bitwise CIO noted that approximately $10 billion in spot Bitcoin ETF assets under management are tied to this trading strategy. However, he does not expect Ethereum spot ETFs to follow the same pattern, as “the carry trade is not reliably profitable in ETH for non-staked assets.”
He added that he does not expect carry trades to impact the assets under management of Ethereum spot ETFs. Given this, Hougan reduced his estimate of net inflows into Ethereum spot ETFs to $15 billion.
According to him:
“[This number] would be a historic success [as] only four ETFs launched since January 2020 have collected $15 billion in flows.