According to the cryptocurrency research company K33 Research, the US Ethereum spot ETF may attract a net capital inflow of $3.1 billion to $4.8 billion in the first five months of trading. K33’s senior analyst Vetle Lunde and DeFi analyst David Zimmerman stated in a report distributed on Tuesday (4th) that their estimate is based on the market size comparison between Bitcoin (BTC) and Ethereum (ETH).
According to the analysts, currently about 3.3% of Ethereum’s circulating supply is held in investment vehicles, showing a steady decline since the peak of the last crypto bull market in November 2021. This trend is similar to Bitcoin’s situation, where the circulating supply held in investment vehicles decreased to 4.1% before the craze of Bitcoin spot ETFs was launched, and later grew to 5.6%.
The analysts added that globally, the assets managed by existing Ethereum ETPs are approximately 28.2% of the assets managed by similar Bitcoin products (excluding US Bitcoin spot ETFs), with this ratio being around 33% in Canada and Europe. Although the US Ethereum futures ETF reduces this global ratio, accounting for only 5% of its Bitcoin futures ETF, the analysts believe this is due to mismatched launch times and does not represent investment demand.
The analysts further stated that applying the weights of these comparable markets to the total net inflows of $14 billion into Bitcoin spot ETFs since their launch in January, K33’s estimate suggests that the Ethereum spot ETF may accumulate 800,000 to 1.26 million Ether in the first five months, equivalent to 0.7% to 1.05% of Ethereum’s circulating supply.
K33’s analysts added that based on the close relationship between Bitcoin ETF flows and annual returns, absorbing such a large supply could lead to an increase in Ethereum prices.
The lack of staking mechanism will not hinder demand
The US Securities and Exchange Commission (SEC) approved the 19b-4 proposal related to Ethereum spot ETFs on May 23, bringing these funds closer to potential listings. However, investors still need to wait for the SEC’s approval of the S-1 registration statement submitted by the fund issuer to start trading such ETFs.
Ethereum spot ETFs will not generate staking rewards upon launch, which seems to be a key factor in obtaining SEC approval for these products. Although some believe that the lack of staking functionality could lead to decreased demand for Ethereum spot ETFs considering the opportunity cost, K33 analysts disagree with this viewpoint, stating:
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Related report: “JPMorgan: Market demand for Ethereum spot ETF may be far lower than Bitcoin ETF”