According to the cryptocurrency research company K33 Research, the US Ethereum spot ETF may attract net inflows 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 analysts, currently about 3.3% of Ethereum’s circulating supply is held in investment tools, showing a steady decline since the peak of the previous crypto bull market in November 2021. This trend is similar to Bitcoin, where the circulating supply held in investment tools dropped to 4.1% before the Bitcoin spot ETF frenzy, and later grew to 5.6%.
Analysts additionally stated 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 ETF), while in Canada and Europe, this ratio is about 33%. Although the US Ethereum futures ETF reduces this global ratio, accounting for only 5% of its Bitcoin futures ETF, analysts believe this is due to the mismatch in their respective launch times and does not represent investment demand.
Analysts further explained that applying the weight of these comparable markets to the $14 billion net inflows into the Bitcoin spot ETF since its launch in January, K33’s estimate suggests that the Ethereum spot ETF may accumulate 800,000 to 1.26 million Ethereum in the first five months, equivalent to 0.7% to 1.05% of Ethereum’s circulating supply.
K33 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’s price.
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 ETF on May 23, bringing these funds closer to potential listing. However, investors still need to wait for the SEC to approve the S-1 registration statement submitted by the fund issuer before trading such ETFs can begin.
Ethereum spot ETFs will not generate staking rewards upon launch, which seems to be a key factor in obtaining SEC approval for these products. While some believe that the lack of staking functionality will lead to a decrease in demand for Ethereum spot ETFs considering opportunity costs, K33 analysts do not agree with this view, stating:
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Related report: “JPMorgan: Market Demand for Ethereum Spot ETF May Be Far Lower Than Bitcoin ETF”