Bitwise CIO Matt Hougan has forecasted that the upcoming spot Ethereum exchange-traded funds (ETFs) will see a $15 billion net flow within their first 18 months of trading. This prediction is based on Ethereum’s market capitalization in comparison to Bitcoin, data from international ETP markets, and the potential influence of the carry trade strategy. Despite the possibility of net outflows from the ETH ETPs after launch, Hougan believes that they will succeed due to Ethereum being one of the best-performing assets ever.
Hougan expects investors to allocate funds to spot Bitcoin and Ethereum ETFs in proportion to their market caps, with Bitcoin ETFs having a weighting of around 74% and Ethereum ETFs at 26%. He anticipates US spot Bitcoin ETFs to have assets under management (AUM) of at least $100 billion by the end of 2025, with Ethereum ETFs needing to attract $35 billion in 18 months to reach parity. However, adjusting for Grayscale Ethereum Trust’s $10 billion AUM, the figure drops to $25 billion.
Data from the European Bitcoin and Ethereum ETP markets shows AUM ratios of 78% for Bitcoin and 22% for Ethereum products, similar to the Canadian market. Hougan believes this distribution reflects the relative demand for Bitcoin and Ethereum among ETP investors and adjusts his expected net flows from $25 billion to $18 billion based on Europe’s 22% market share as a proxy.
Hougan also highlighted the impact of “the carry trade” on Ethereum ETF flows, noting that around $10 billion of spot Bitcoin ETF AUM is connected to this trading strategy. However, he does not expect spot Ethereum ETFs to follow the same pattern due to the lack of profitability in carry trading for non-staked assets in Ethereum. As a result, he revised his estimate for net inflows into spot Ethereum ETFs to $15 billion, which he views as a historic success given that only four ETFs launched since January 2020 have gathered $15 billion in flows.
Overall, Hougan’s predictions and analysis suggest that the impending spot Ethereum ETFs have the potential for significant success, despite potential challenges such as net outflows and the impact of carry trading. Investors will be closely watching the performance of these ETFs in the coming months to see if they align with Hougan’s forecasts and expectations.
