Ethereum (ETH), the world’s second-largest cryptocurrency by market cap, is poised to make waves in the ETF space, according to new research from Galaxy Digital. The crypto investment firm, led by Mike Novogratz, has published a detailed analysis forecasting that Ethereum ETFs will attract approximately one-third of the inflows that Bitcoin ETFs receive. This projection underscores the growing interest and potential impact of Ethereum ETFs on the broader cryptocurrency market.
Charles Yu, Galaxy Digital’s vice president of research, shared insights in a recent research post that provides a comprehensive comparison between Ethereum and Bitcoin in the context of ETFs. Yu’s analysis suggests that Ethereum ETFs could see roughly 33% of the inflows that Bitcoin ETFs currently enjoy. This estimation is based on a thorough evaluation of several key metrics:
Yu’s research delves into the specifics of how these metrics translate into expected inflows for Ethereum ETFs. The firm estimates that ETH spot ETF inflows will be approximately three times less than those of Bitcoin spot ETFs. This ratio aligns with the comparative market caps of the two cryptocurrencies.
“Based on the above, we think that ether spot ETF inflows will be approximately 3x less than US spot bitcoin ETF inflows (in line with the cap multiple) with a range of 2x to 5x. In other words, we think that ether spot ETF inflows could be 33% the size of US spot bitcoin ETF inflows with a range of 20% to 50% of size in dollars,” Yu explained.
To put this into perspective, if Bitcoin spot ETFs have seen inflows of $15 billion through mid-June, Ethereum spot ETFs could attract about $1 billion per month for the first five months following their approval. This range could vary between $600 million to $1.5 billion per month, depending on market conditions and investor interest.
Yu asserts that the introduction of Ethereum ETFs will have a broadly positive impact on the ETH markets for several reasons:
The anticipated start and subsequent inflows into Ethereum ETFs signify a crucial development for the broader cryptocurrency market. Here are several broader implications:
While the forecast for Ethereum ETFs is optimistic, there are potential challenges and considerations to keep in mind:
The forecast by Galaxy Digital that Ethereum ETFs will attract substantial inflows, approximately one-third of those seen by Bitcoin ETFs, marks a significant development in the cryptocurrency investment landscape. The introduction of Ethereum ETFs is expected to enhance accessibility, regulatory acceptance, and distribution, thereby positively impacting the ETH market.
As the cryptocurrency market continues to evolve, the role of ETFs will become increasingly important in bridging the gap between traditional finance and digital assets. Investors and market participants should keep a close eye on these developments, as they have the potential to shape the future of cryptocurrency investments.
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