Ethereum (ETH) spot exchange-traded funds (ETFs) could witness significant market traction once they receive approval for trading, with potential net inflows of $1 billion per month.
Ethereum Spot ETFs Could See $5 Billion in Net Inflows in First Five Months
This forecast came from Galaxy (GLXY) Research, which published a report predicting a total net inflow of $5 billion in the first five months.
“We expect net inflows into ETH ETFs to be 20-50% of net inflows into BTC ETFs in the first five months, our target is 30%, which translates to net inflows of $1 billion per month,” Galaxy analyst Charles Yu said.
The expectation of these inflows comes against a backdrop of the U.S. Securities and Exchange Commission (SEC) approving initial applications from Ethereum ETF applicants last month.
However, these products are awaiting final approval of their S-1 filings by the SEC before they begin trading. Spot Bitcoin ETFs were introduced in the US market in January, setting a precedent for Ethereum ETFs.
Similar to their Bitcoin counterparts, primary demand for Ethereum ETFs is expected to come from independent investment advisors and broker/dealer platforms.
The Galaxy report highlighted that Ethereum is more price sensitive to ETF inflows compared to Bitcoin.
This sensitivity is attributed to the fact that a significant portion of the ETH supply is locked in staking, bridges and smart contracts, as well as the lower amount of ETH held on centralized exchanges.
Despite this optimism, Galaxy cautioned that demand for spot Ethereum ETFs may be somewhat constrained by the lack of staking rewards.
Additionally, outflows from the Grayscale Ethereum Trust (ETHE) could pose a challenge, potentially dragging out Ethereum ETF inflows. Galaxy estimates that these negative flows could amount to approximately 319,000 ETH per month, or $1.1 billion.
*It is not an investment recommendation.