Bitwise chief investment officer Matt Hougan recently discussed the potential inflow of funds that a US spot Ethereum ETF could attract. Specifically, he outlined how much capital these funds could attract in the first 18 months of trading.
Spot Ethereum ETF sets a record of $15 billion in trading in the first 18 months
In a report to investors, Hougan mentioned that a spot Ethereum ETF could potentially see net inflows of $15 billion in the first 18 months of trading. He detailed how he arrived at these figures to demonstrate that this is not just speculation. Firstly, Hougan emphasized the market value of Bitcoin and Ethereum, stating that he expects investors to allocate their trading products (ETPs) to exchanges in proportion to their market values.
Hougan noted that US investors have already invested $56 billion in spot Bitcoin ETPs, and this figure is expected to reach $100 billion or more by the end of 2025, at which point these funds should further mature and gain approval on platforms such as Morgan Stanley and Merrill Lynch.
Taking this into account, Bitwise’s chief information officer stated that a spot Ethereum ETF would need to attract $35 billion in assets to be on par with Bitcoin ETFs, a process that would likely take around 18 months. Hougan also emphasized that since the Grayscale Ethereum Trust (ETHE) will convert to an ETF on the day of its launch, the spot Ethereum ETF will have $10 billion in assets at launch.
Therefore, Hougan pointed out that the spot Ethereum ETF currently has $25 billion in inflows, matching the expected inflow of the spot Bitcoin ETF by the end of 2025. Hougan then highlighted data from the international ETP market, showing that investors may allocate roughly according to the market values of Bitcoin and Ethereum ETPs.
Using the international market as a reference
Hougan stated that European Bitcoin and Ethereum ETPs hold €4,601 and €1,305 in assets under management (AuM) respectively, which represents 78% and 22% of the total available funds in these markets. Similarly, Canadian Bitcoin and Ethereum ETPs hold $4,942 (77%) and $1,475 (23%).
Based on the market share of Ethereum in the Canadian ETP market, Hougan estimated that a US spot Ethereum ETF could also capture a 22% market share in the US market. As a result, Hougan adjusted his estimate of the net inflow of the spot Ethereum ETF from $25 billion to $18 billion, excluding Grayscale’s assets.
Hougan ultimately lowered the projected net inflow to $15 billion, as a significant portion of the funds flowing into the US spot Bitcoin ETF are related to arbitrage trading. He removed $10 billion related to arbitrage from the Bitcoin market, reducing the valuation of Bitcoin from $100 billion to $90 billion, and lowering the spot Ethereum ETF’s valuation from $18 billion to $15 billion.
ETH price remains at $3,300|Source: ETHUSDT on Tradingview.com