Key Takeaways
- Bitcoin ETFs garnered $15.1 billion in net inflows within five months of launch (January–June 2024).
- Ten Ethereum spot ETFs from nine issuers are poised for U.S. launch, with SEC approval expected by July 2024.
- Primary demand drivers: independent investment advisors and wealth management platforms.
- Projected ETH ETF inflows: 20–50% of BTC ETF flows ($1 billion/month, 30% target).
- ETH's price sensitivity to inflows exceeds BTC's due to lower exchange liquidity and locked supply (staking, smart contracts).
Introduction
Despite initial skepticism, the SEC approved spot Ethereum ETFs in May 2024, with trading anticipated by mid-July. Drawing parallels from Bitcoin ETFs, this report estimates $5 billion in net ETH ETF inflows over five months (30% of BTC ETF flows).
Background
ETF Issuers and Timeline
- Nine issuers compete for ten spot ETH ETF products.
- SEC approved 19b-4 filings on May 23; S-1 effectiveness pending for launch.
- Grayscale plans to convert its Ethereum Trust (ETHE) into an ETF, mirroring its BTC strategy.
Learnings from Bitcoin ETFs
- $15.1 billion net inflows in five months.
- GBTC outflows peaked at $642 million/day but stabilized by May.
- Demand initially retail-driven; institutional adoption rising (e.g., Morgan Stanley, pension funds).
Estimating ETH ETF Demand
Methodology
Apply BTC/ETH multiples to inflow estimates based on:
- Market cap ratios (BTC 2.9× ETH).
- Futures market liquidity (BTC 2× ETH).
- Adjusted projection: **$1 billion/month** inflows (range: $600M–$1.5B).
Unique ETH Challenges
- No staking rewards in U.S. ETFs → opportunity cost (~5.6% APY forgone).
- ETHE outflows may mirror GBTC’s $1.1B/month drag.
- Basis trade potential: Higher ETH funding rates attract arbitrage.
Price Sensitivity: ETH vs. BTC
Supply Dynamics
| Factor | BTC Adjustment | ETH Adjustment |
|-----------------------|----------------|----------------|
| Staked supply | N/A | –8.2% |
| Dormant supply | –8.3% | –3.4% |
| Bridges/contracts | –0.4% | –2.9% |
| Total adjusted | –8.7% | –14.4% |
Key Insights:
- ETH’s lower exchange liquidity (10.3% vs. BTC’s 11.7%) amplifies price impact.
- Net emissions: ETH’s deflationary burn offsets staking yields.
FAQs
Q: Will ETH ETFs attract new investors or cannibalize BTC ETF demand?
A: Likely both—rebalancing from existing holders but also new institutional entrants.
Q: Can staking be added to U.S. ETH ETFs later?
A: Possible, but regulatory hurdles remain. Non-staking ETFs may limit appeal.
Q: How might ETH ETFs impact altcoins?
A: Success could pave the way for altcoin ETFs, though SEC scrutiny will intensify.
👉 Stay updated on ETF developments
Conclusion
Ethereum ETFs promise broader market access and regulatory legitimacy, potentially accelerating ETH’s role in diversified portfolios. Despite structural challenges (e.g., staking exclusion), inflows could drive disproportionate price appreciation versus BTC due to ETH’s constrained supply.
Disclaimer: This report is informational and not investment advice. Galaxy Digital holds positions in discussed assets.
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