Bitwise CIO Predicts Massive $15 Billion Inflow for Ethereum ETFs Despite Grayscale Outflows

By: Isha Das

Bitwise CIO Matt Hougan has projected a significant market movement with the introduction of spot Ethereum (ETH) exchange-traded funds (ETFs). According to Hougan, these ETFs are expected to see a staggering $15 billion net flow within the initial 18 months of trading.

Hougan's forecast takes into account Ethereum's current market capitalization relative to Bitcoin (BTC), data from international ETP markets, and the potential implications of the carry trade strategy. He also highlighted the possibility that ETH ETPs may experience net outflows post-launch as traders involved in discount arbitrage might aggressively redeem their positions from the Grayscale Ethereum Trust (ETHE), akin to the trend observed with Grayscale's Bitcoin Trust following the launch of Bitcoin ETFs.

Despite the potential for outflows, Hougan remains optimistic about the success of Ethereum ETPs, pointing to Ethereum's robust performance history as an indicator of future success. He noted that the allocation of funds to spot Bitcoin and Ethereum ETFs would likely mirror their market caps, currently standing at $1.26 trillion for Bitcoin and $432 billion for Ethereum. This implies an expected fund allocation of approximately 74% for Bitcoin ETFs and 26% for Ethereum ETFs.

As US spot Bitcoin ETFs' assets under management (AUM) are projected to rise to at least $100 billion by the end of 2025, Hougan suggested that Ethereum ETFs must attract $35 billion within 18 months to reach parity. This figure drops to $25 billion when accounting for Grayscale Ethereum Trust's $10 billion AUM.

Data from European Bitcoin and Ethereum ETP markets reveal AUM ratios of 78% for Bitcoin and 22% for Ethereum, while Canadian markets show a 77% to 23% split. Hougan's confidence in his prediction is bolstered by these figures, which reflect the relative demand for Bitcoin and Ethereum among ETP investors. Using Europe and Canada as benchmarks, he adjusted his expected net flows for Ethereum ETFs to $18 billion.

Another critical factor is the carry trade strategy, which exploits the price differences between an underlying asset's spot and futures prices. Hougan noted that around $10 billion of spot Bitcoin ETF AUM is linked to this strategy but added that carry trading is not reliably profitable for non-staked ETH assets. As a result, Hougan does not expect carry trades to impact the AUM of spot Ethereum ETFs, reducing his estimate for net inflows to $15 billion. He emphasized that reaching this figure would be a historic achievement, as only four ETFs launched since January 2020 have amassed such significant inflows.