Cryptocurrency management company Bitwise predicted on Wednesday that the Ethereum spot ETF would accumulate over $15 billion in net inflows within the first 18 months of entering the US market.
The company’s year-and-a-half forecast is roughly equivalent to the net gains of the Bitcoin exchange-traded fund (ETF) since its launch five months ago ($14.4 billion), with the excitement generated from it helping drive historic highs in Bitcoin trading volume.
Calculating the flow of Ethereum’s ETF, Bitwise’s Chief Information Officer Matt Hougan’s estimate is based on Bitcoin ETF data, comparing Ethereum to the overall market size of Bitcoin.
Currently, Bitcoin has a market value of $1.26 trillion, while Ethereum’s market value is $432 billion, resulting in an asset ratio of 3:1. Out of the mentioned Bitcoin, $56 billion is locked in US Bitcoin ETFs, and Hougan expects this to increase to $100 billion by the end of 2025.
He stated, “By that logic, a spot Ethereum ETP would need $35 billion in assets under management to reach parity.”
However, this figure does not necessarily mean $35 billion of fund inflows. Firstly, Grayscale’s Ethereum Trust (ETHE) will convert to an ETF on launch day with $10 billion, just as Grayscale’s Bitcoin Trust (GBTC) converted with $30 billion in assets. Taking this into account, Hougan has lowered his estimate for ETF flows to $25 billion.
Nevertheless, the proportion difference in Bitcoin and Ethereum ETPs in other jurisdictions is nearly the same. In Europe, Bitcoin ETP holds €4.6 billion, while Ethereum holds €1.3 billion. In Canada, Bitcoin ETP controls $4.9 billion CAD, while Ethereum-based funds have $1.4 billion CAD.
Hougan wrote, “The split roughly reflects the relative market values of the two assets, which makes me more confident that this split reflects ‘natural’ demand.”
Assuming a conservative ratio of 78% BTC and 22% ETH in Europe, Hougan’s estimate for Ethereum ETF inflows would be reduced to $18 billion.
Adjusting for cash and carry trades
Hougan stated that this estimate must also be adjusted for “arbitrage trades” in the Bitcoin ETF market.
In recent months, analysts have emphasized that many institutions buying Bitcoin ETFs are simply engaging in “cash and carry trades,” seeking risk-free returns by longing the spot market while shorting the futures market. As Bitcoin futures often exhibit directional bullish bias, the profitability of these trades is usually quite high.
However, Hougan noted that Ethereum’s underlying trading pairs are “unreliable for profit” for unsecured assets, meaning the Ethereum ETF would not see demand as a result. He said, “Removing arbitrage trading assets from our model would reduce our flow estimate from $18 billion to $15 billion.”
With $15 billion in fund inflows, Hougan believes the Ethereum ETF would achieve historic success. Since January 2020, only four ETFs have seen fund inflows reach this level.
Hougan concluded, “ETH is one of the best-performing assets in history, and frankly, its best days are ahead.”
In a research report earlier this month, K33 research predicted that the Ethereum ETF would receive $4 billion in fund inflows within the first five months of listing. As early as March, Standard Chartered Bank forecasted that the ETF would attract $45 billion in capital inflows within the first 12 months.
