Bitwise CIO, Matt Hougan, has made a bold prediction regarding the potential inflow into Ethereum ETFs. He anticipates a massive $15 billion net flow within the first 18 months of trading for these ETFs. This forecast is based on various factors such as Ethereum’s market capitalization in comparison to Bitcoin, data from international ETP markets, and the carry trade strategy.
While Hougan acknowledges the possibility of net outflows from the ETH ETPs, particularly after the initial launch due to discount arbitrage traders redeeming their positions from Grayscale Ethereum Trust (ETHE), he remains optimistic about the success of Ethereum ETFs. He highlights that Ethereum is one of the best-performing assets ever, which bodes well for these investment products.
In terms of market allocation, Hougan expects investors to distribute their funds between spot Bitcoin and Ethereum ETFs based on their market caps, which are currently $1.26 trillion and $432 billion respectively. This would translate to a weighting of approximately 74% for Bitcoin ETFs and 26% for Ethereum ETFs.
Looking at the potential growth of US spot Bitcoin ETFs, Hougan predicts that assets under management (AUM) could reach $100 billion by the end of 2025. To achieve parity, Ethereum ETFs would need to attract $35 billion in 18 months, but after accounting for Grayscale Ethereum Trust’s $10 billion AUM, this figure drops to $25 billion.
Analyzing data from European and Canadian Bitcoin and Ethereum ETP markets, Hougan notes similar asset splits with Bitcoin holding around 78% and Ethereum around 22% in both regions. He interprets this distribution as reflective of the relative demand for Bitcoin and Ethereum among ETP investors.
Additionally, Hougan emphasizes the impact of the carry trade strategy on Ethereum ETF flows. While this trading strategy has been significant for spot Bitcoin ETFs, he does not anticipate the same level of influence on spot Ethereum ETFs due to the nature of Ethereum’s market dynamics. Consequently, he has revised his estimate for net inflows into Ethereum ETFs down to $15 billion.
In conclusion, Hougan views the projected $15 billion inflow into Ethereum ETFs as a historic success, considering that only four ETFs have achieved this milestone since January 2020. Despite potential challenges such as outflows from Grayscale and the influence of the carry trade, he remains confident in the long-term viability and attractiveness of Ethereum ETFs in the investment landscape.