Bitwise Chief Investment Officer: Why Will Spot Ethereum ETPs Attract Tens of Billions of Dollars?
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Bitwise Chief Investment Officer: Why Will Spot Ethereum ETPs Attract Tens of Billions of Dollars?
Matt Hougan believes that spot Ethereum ETPs will attract $15 billion in the first 18 months after launch.
Navigating Web3 tides with focused insightsAuthor: Matt Hougan, Chief Investment Officer at Bitwise
Translation: Luffy, Foresight News
Everyone wants to know how much capital the spot Ethereum ETPs will attract. My answer: $15 billion over the first 18 months.
Author’s note: While “ETF” is the term most people use to describe spot Bitcoin and spot Ethereum funds, technically they are better classified as ETPs (exchange-traded products). This is because regulators distinguish between products under the 1933 Act (ETPs) and those under the 1940 Act (ETFs), which have different rules and investor protections.
This isn’t a guess—it’s data-driven. Here’s how I arrived at this conclusion.
Starting Point: Relative Market Capitalization
A good starting point for estimating inflows is to look at the relative size of BTC and ETH. After all, absent other information, I’d expect investors to allocate roughly in line with their market cap proportions across spot Bitcoin and Ethereum ETPs.
Here's how they currently compare:
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Bitcoin: $126.6 billion (74%)
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Ethereum: $43.2 billion (26%)
U.S. investors have already invested $56 billion into spot Bitcoin ETPs. I estimate that as these products mature and platforms like Morgan Stanley and Merrill Lynch come on board, this figure could reach $100 billion or more by the end of 2025.
Using this $100 billion figure as a benchmark, spot Ethereum ETPs would need to attract $35 billion in assets to match Bitcoin’s proportional scale. I expect this to take about 18 months.
Does this mean we should expect $35 billion in inflows when Ethereum ETPs launch? No. First, Grayscale’s Ethereum Trust (NYSE: ETHE) is expected to convert into an ETP on day one, bringing approximately $10 billion in assets.
Subtracting that amount, we’re left with $25 billion in net new inflows.
Is this estimate reasonable? Let’s look at international data.
Insights from International ETP Markets
While non-U.S. ETP markets aren’t identical to the U.S., they offer useful parallels.
For example, Europe and Canada already have both Bitcoin and Ethereum ETPs. Aggregating all available funds in each market yields the following AUM (assets under management) comparisons:
Europe
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Bitcoin ETP: €4.6 billion (78%)
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Ethereum ETP: €1.3 billion (22%)
Canada
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Bitcoin ETP: C$4.9 billion (77%)
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Ethereum ETP: C$1.5 billion (23%)
Notably, the allocation between Bitcoin and Ethereum ETPs in both European and Canadian markets is nearly identical—and closely aligns with the market cap distribution I highlighted earlier. This suggests my initial estimate falls within a reasonable range.
You might ask: Why do Ethereum ETPs slightly underperform relative to their market cap weight? They currently represent 22–23% of total AUM versus a 26% market cap share.
I can imagine several reasons—Bitcoin ETPs launched earlier in these markets (just as in the U.S.), and some investors may have bought Bitcoin ETPs but stopped there, believing they already had sufficient crypto exposure. I suspect similar behavior will occur in the U.S.
Therefore, let’s lower our estimate, assuming Ethereum ETPs capture only 22% of the market, in line with Canada. This reduces our net inflow estimate from $25 billion to $18 billion, excluding Grayscale’s trust conversion.
Additional Factors to Consider
Another important consideration: arbitrage trades may play different roles in Bitcoin versus Ethereum ETP markets.
A significant portion of flows into U.S. Bitcoin ETPs has been driven by arbitrage trades. These involve buying a spot Bitcoin ETP while simultaneously selling a Bitcoin futures contract against it. The profit comes from the current premium of futures prices over spot. While profitability varies, investors have generally earned around 10% annually with limited risk since the launch of Bitcoin ETPs. I estimate about $10 billion of current Bitcoin ETP AUM is tied to such arbitrage activity.
I don’t expect the same dynamic for Ethereum. Arbitrage trading in Ethereum ETPs is currently unattractive for institutions—partly because U.S.-listed Ethereum ETPs won’t participate in staking. For this reason, we should exclude $10 billion of arbitrage-related AUM when assessing the Bitcoin market baseline.
Doing so reduces the effective Bitcoin ETP AUM denominator to $90 billion. Thus, our estimated net inflows into Ethereum ETPs fall into the $15–18 billion range.
Conclusion
There’s room to refine this model further.
For instance, you might argue Ethereum ETPs will underperform my estimates because they don’t offer staking rewards, which could dampen demand. I disagree—staking yield is just rounding error compared to Ethereum’s average annual returns, and I believe ETP investors will be satisfied simply having access.
On the other hand, my estimate doesn’t account for multiple tailwinds behind Ethereum’s growth—including the rise of stablecoins, increasing regulatory clarity, and the ongoing impact of the Dencun upgrade. Strong bullish sentiment around ETH as an asset could significantly boost ETP demand.
Still, I believe $15 billion in net inflows over the next 18 months is a solid starting point. My gut says the outcome will be even better. ETH is a compelling asset powering the world’s most versatile blockchain. Even $15 billion in new net demand will have a major impact on the Ethereum ecosystem.
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