Bloomberg ETF analyst James Seyffart believes spot Ethereum ETFs could capture 20-25% of the demand experienced by spot Bitcoin ETFs.
Seyffart made his statement in an interview hosted by Bitwise, while fellow Bloomberg ETF analyst Eric Balchunas added that he believes the new fund will account for 15-20% of demand.
Seyffart compared both estimates to the fact that ETH accounts for about 30% of Bitcoin’s $1.4 trillion market cap, calling his estimate a “discount.”
He attributed the differences to the specific limitations of each product. The ETH ETF issuer does not participate in staking. This means that, unlike ETH holders, ETF investors do not receive returns. Additionally, Ethereum has better on-chain utility than Bitcoin, so ETF investors cannot access it.
Seyffart declared:
“…the gap between Ethereum as an ETF and Ether itself…is a little wider than the gap between Bitcoin and Bitcoin as an ETF wrapper.”
Seyffart said the Ethereum futures ETF, which has just 12% of assets compared to futures ETFs in the U.S., does not provide a “good sample” for estimates. ETH futures ETFs in foreign markets hold 20-30% of assets proportional to Bitcoin futures ETFs.
Ultimately, Seyffart predicted that a spot ETH ETF would have a “massive launch,” but not as big as a spot Bitcoin ETF launch. “The demand will be there,” he concluded.
Bitwise CIO anticipates significant demand
Bitwise CIO Matt Hougan predicted “significant demand” for a spot Ethereum ETF.
Hougan said demand will come from two sources. First, he suggested that many investors view diversification as a “fundamental starting point.”
He predicted that “many” but “not many” investors will initially pursue a diversification strategy. Hougan also suggested that participation could increase over time, as the majority of professional investors seek diversified exposure within five years.
Hogan said:
“(Investors) don’t want to own any stocks. They don’t want to own one bond. Why would they own only one cryptocurrency asset?”
Second, Hougan said Ethereum’s role as a “high-growth technology investment” will appeal to investors, citing “killer apps” such as stablecoins, non-fungible tokens, DeFi, gaming and social apps.
ETH ETF Receives Initial Approval
The US SEC approved several Rule 19b-4 changes on May 23. This will allow the exchange to list and trade several pending spot ETH ETFs.
One of the proposals that received approval was submitted by NYSE Arca on behalf of a fund proposed by Bitwise.
The SEC still must process each company’s S-1 registration statement.
The release date is unclear. Seyffart believes the rollout could take a few more weeks. JP Morgan believes the product will be launched before November.