The cryptocurrency sector is abuzz with anticipation for the introduction of spot Ethereum exchange-traded funds (ETFs) in the United States. Market analysts are predicting that these ETFs could potentially usher in significant capital inflows.
Matt Hougan, the Chief Investment Officer at Bitwise, is confident about the future of these investment vehicles. He forecasts that spot Ether ETFs will experience a remarkable $15 billion in net inflows within their initial 18 months of trading. Hougan shared his insights in an analysis posted on June 26.
His prediction of $15 billion is grounded in a comprehensive evaluation of existing data. This includes juxtaposing the market capitalization of Ethereum (ETH) with that of Bitcoin (BTC), examining the global crypto ETP market, considering the conversion of Grayscale’s Ethereum Trust (ETHE) into an ETF, and analyzing the dynamics of the spot Bitcoin ETFs’ carry trade.
Hougan anticipates that investment allocations for Bitcoin and Ethereum ETFs will mirror their respective market caps. It’s important to note that his calculations only consider the combined market cap of these two leading cryptocurrencies.
The comparison of BTC and ETH market capitalizations, as depicted by TradingView, shows the relative sizes of these digital assets.
Hougan elaborated that currently, U.S. investors have invested $56 billion in spot Bitcoin ETPs. He projects this amount to escalate to $100 billion by the end of 2025, as these ETFs gain maturity and receive approvals from financial platforms like Morgan Stanley.
If we use the $100 billion mark as a reference and deduct the $10 billion anticipated for Grayscale’s Ethereum Trust’s ETF conversion, it’s plausible that spot Ethereum ETFs might witness a net inflow of $25 billion.
To corroborate this estimate, Hougan examined ETF markets across Canada and Europe. He discovered that the investment distribution between Bitcoin and Ethereum is similar, with Bitcoin ETPs constituting roughly 78% and Ethereum ETPs about 22% of the total assets under management (AUM).
Given that Ethereum ETFs internationally command only about 22% of the total market share in comparison to Bitcoin, this adjusts the projection from $25 billion down to $18 billion.
Hougan also reflected on the potential effects of the carry trade, expressing skepticism that institutions will engage in an Ethereum carry trade as they do with Bitcoin ETFs, especially considering the lack of staking options in U.S. spot Ethereum ETFs.
The carry trade strategy involves purchasing an asset in the spot market while simultaneously shorting its future market equivalent. The goal is to capitalize on the differential when the futures contract is priced higher than the spot price.
Adopting a cautious stance, Hougan subtracted the $10 billion attributed to carry-trade-related AUM from the Bitcoin market size. This adjustment leads to a conservative estimate of $15 billion in net inflows for Ethereum ETPs by the end of 2025.
In the meantime, companies poised to issue spot Ethereum ETFs are in the final stages of their registration process, following the green light from the U.S. Securities and Exchange Commission (SEC) on May 23.
Entities are actively updating their Form S-1 registration statements, a necessary step in the preparation for launch. Bloomberg ETF analyst Eric Balchunas suggests that spot Ether ETFs might commence trading in the U.S. by July 2.
This information is courtesy of Eric Balchunas.
On June 25, VanEck, an investment management firm, took a significant step towards the introduction of its spot Ether ETF by filing a Form 8-A with the SEC.
As for the price of Ether, it seems to have found a solid support level around $3,300. Data from IntoTheBlock indicates that the $3,300 zone is a significant demand area. The In/out of the Money Around Price (IOMAP) model reveals that between $3,257 and $3,557, approximately 1.4 million ETH were acquired by nearly 2.73 million addresses.
The Ethereum IOMAP chart, sourced from IntoTheBlock, illustrates this support zone.
An examination of the ETH/USD weekly chart reveals that the 20-week exponential moving average (EMA) aligns with this support level, serving as a robust defense line for bullish investors.
From a technical analysis perspective, the relative strength index (RSI) remains above the neutral midpoint, and a price strength of 55 indicates that the market sentiment is still skewed towards bullish conditions.
The ETH/USD weekly chart, provided by TradingView, showcases these technical indicators.
Looking ahead, traders seem to be eyeing price targets for Ether in the range of $3,500 to $3,973 in the near term.
Please note that this article is not intended to serve as investment advice or recommendations. All investments and trading activities come with inherent risks, and individuals should perform their own due diligence before making any financial decisions.