Spot Ethereum ETFs could capture up to 20% of Bitcoin ETF flows, analyst predicts

Spot Ethereum exchange-traded funds could capture as much as a fifth of the investment flows currently directed towards spot bitcoin ETFs, an analyst said.

"Forecasts show that spot Ethereum ETFs could capture between 10-20% of the flows that have been going into spot bitcoin ETFs," Bitfinex head of derivatives Jag Kooner told The Block. However, Kooner said he believes a lot depends on clarification in the future regarding staking being allowed or denied by the U.S. Securities and Exchange Commission for spot Ethereum ETFs.

The Bitfinex analyst provided a historical example of how fund managers divert funds between multiple related ETFs to balance their exposure. "The launch of gold ETFs offers a historical parallel, as when new gold ETFs were introduced, they attracted significant investment, which in turn affected the inflows into existing financial products related to gold. Similarly, the introduction of Ethereum ETFs could see fund managers reallocating resources to balance their exposure to both bitcoin and Ethereum," he added.

Fund managers seek diverse portfolios

Kooner provided a specific example of how fund managers have diversified their ETF portfolios in the past to spread risk and potentially enhance returns.

"The first gold spot ETF was introduced in November 2004, when the SPDR Gold Trust (GLD) debuted on the New York Stock Exchange, this ETF revolutionized gold trading by providing a convenient and liquid way for investors to gain exposure to gold without the need to physically hold the metal," Kooner said.

Kooner further pointed out that when silver ETFs were introduced, the first being the iShares Silver Trust in 2006, investors added these positions and diverted funds to them, particularly due to the increasing demand for silver for industrial uses."The same may hold true for Ethereum spot ETFs given Ethereum’s use cases," he added.

Ethereum's price slid slightly by 0.65% over the past 24 hours and was changing hands for $3,667 at 5:41 a.m. ET, according to The Block’s Price Page. The GM 30 Index, representing a selection of the top 30 cryptocurrencies, decreased by 1% to 141.79 in the same period.