Since the outlook for an Ethereum ETF turned favorable, the cryptocurrency industry has been buzzing with renewed optimism. Among hopeful issuers and investors, this resurgence of confidence has raised expectations that the investment vehicle will channel additional capital into the second-largest cryptocurrency and its broader ecosystem.
Fueling this positive sentiment, Bitwise, an aspiring ETH ETF issuer, has expressed strong belief in the success of this highly anticipated asset.
Ethereum ETF Gateway to Billions
Considering the potential performance of an ETH ETF in its initial months, Bitwise’s Chief Investment Officer, Matt Hougan, forecasts net inflows reaching up to $15 billion. Central to this analysis is the expectation that investor allocations to Ethereum will mirror its market capitalization. Hougan highlighted Bitcoin’s dominance, with a market cap of 74% compared to Ethereum’s 26%, as crucial for predicting how funds might flow into the ETF.
Drawing insights from the European and Canadian ETP markets, where Ethereum exchange-traded products have attracted assets in line with their market cap, Hougan added that a similar pattern could emerge in the US, driving substantial inflows to the investment vehicle.
Bitwise’s CEO further noted that for an Ethereum ETP to achieve success comparable to Bitcoin, it would need to amass around $35 billion by 2025. He stated that Grayscale’s anticipated conversion of its $10 billion Ethereum Trust into an ETF would act as a catalyst, with an additional $25 billion expected to accumulate over time, enhancing its prospects for success.
Addressing concerns about the lack of staking in an Ethereum ETF, Hougan argued against its potential impact on demand.
“For example, one could argue that Ethereum ETPs will underperform my estimates because they won’t stake assets, which would reduce demand. I don’t think this is true—staking income is a rounding error relative to ETH’s average annual returns, and I believe ETP investors will be content with mere exposure,” he explained.
Hougan’s analysis presents a promising outlook for Ethereum ETFs, particularly amid predictions that they might not achieve the same level of success as Bitcoin.
Will ETH ETFs Lag Behind Bitcoin?
According to ETF analyst James Seyffart, these funds might only attract a quarter of the investment seen by their Bitcoin counterparts.
Taking a more skeptical approach compared to Bitwise’s CIO, Seyffart asserted that the significant difference in market capitalization between Bitcoin and Ethereum places Ethereum at a disadvantage, making it challenging for ETH ETFs to draw comparable levels of investment.
While the launch of this investment vehicle is still expected to generate significant buzz, the ETF expert stated that it might not make as substantial an impact as Bitcoin, estimating that it may only attract 20-25% of the investment seen in Bitcoin ETFs.
Another key point of his skepticism is that Ethereum ETFs are unlikely to fully leverage the potential of the Ethereum blockchain. While direct ownership grants investors access to participate in DeFi and NFTs, ETFs do not, which could add a layer of caution for investors and affect their success.
Why This Matters
Bitwise CIO Hougan predicts a promising path for Ethereum ETFs, addressing concerns about potential underperformance. Regardless of their performance, however, the launch of Ethereum ETFs will undoubtedly mark a significant milestone for the industry and attract substantial investments.
