A new U.S. spot Ethereum exchange-traded fund could attract net inflows of $3.1 billion to $4.8 billion in its first five months of trading, according to analysts at K33 Research.
The analysts’ estimates are based on a comparison of the market caps of Bitcoin and Ethereum, K33 senior analyst Vetul Lunde and DeFi analyst David Zimmerman said in a report on Tuesday. report.
About 3.3% of Ethereum’s circulating supply is currently stored in investment vehicles, according to analysts, and has been steadily declining since the peak of the crypto bull market in November 2021. This mirrors a similar trend for Bitcoin stored in investment vehicles, which fell to 4.1% ahead of the hype of the launch of a spot Bitcoin ETF. Bitcoin exchange-traded funds have since grown to 5.6% of the circulating supply, according to K33.
Globally, existing Ethereum ETPs hold 28.2% of Bitcoin ETF assets under management, excluding U.S. spot Bitcoin ETFs, the analysts added, while in Canada and Europe the figure is around 33%.
While U.S. Ethereum futures ETFs only account for 5% of Bitcoin, dwarfing the global figure, Lunde and Zimmerman argue this is due to discrepancies in their respective launch dates rather than a reflection of investment demand.
“The thesis that futures ETFs are unrepresentative outliers is strengthened by CME’s ETH open interest, which is currently 22.9% of BTC, with BTC futures’ average share of 35% since inception, indicating large institutional demand for ETH in the US,” the analysts added.
Comparing ETH ETP AUM and CME OI with BTC ETP and CME. Image: K33 Research.
Applying these comparable market weightings to the total $14 billion in spot Bitcoin ETF net inflows since its launch in January, K33 estimates that the spot Ethereum ETF could accumulate between 800,000 and 1.26 million ETH over its first five months, which represents between 0.7% and 1.05% of the circulating Ethereum supply.
Estimated 5-month net inflows into the ETH ETF under various scenarios. Image: K33 Research.
“I’m not going to bet on Fink just yet.”
The U.S. Securities and Exchange Commission approved Form 19b-4 for eight spot Ethereum ETFs from firms including BlackRock and Fidelity on May 23. However, before trading can begin, issuers must wait for their S-1 registration statements to become effective, a process that could take several weeks.
“We’re not placing our bets yet,” the analysts said. [Larry] BlackRock CEO Fink’s “Midas touch” towards Ethereum helped create an environment that allowed the cryptocurrency to maintain its relative strength throughout the summer.
“Given the strong relationship seen between BTC ETF flows and returns throughout the year, such significant supply absorption will likely translate into higher ETH prices,” they added.
The new spot Ethereum ETF will not earn a staking reward yield at launch, which is likely a key factor in its approval by the SEC. Some have argued that the lack of staking would reduce demand given the opportunity cost, but analysts at K33 disagree.
“Over 98% of ETH ETF AUM in Europe and Canada is in non-staking ETPs, indicating that lack of staking is by no means a deal-breaker for ETP investors,” they said.
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