Podcast Summary
ETH ETF Market Growth: Two ETF issuers predict substantial Ethereum ETF inflows in H2 2022 and beyond, with demand potentially surpassing 2024 levels due to ETH ETF approval and bullish crypto sentiment.
Both Matt Hogan from Bitwise and Alex Thorne from Galaxy Digital, two ETF issuers, expect significant inflows into the Ethereum ETF market in the second half of 2022 and beyond. They believe the demand for Ethereum ETFs will exceed that of 2024, driven by the upcoming ETH ETF approval and the overall bullish sentiment in the crypto market. The guests also discussed the potential impact of the ETH ETF on the market and the possibility of the ETH-E trust from Grayscale. The conversation was bullish in tone, addressing bearish sentiments and providing insights into the ETF market and the crypto industry as a whole. Kraken, the recommended exchange for getting ether before the ETF, was also mentioned as a sponsor.
Ethereum ETFs demand: Estimates suggest $10B to $100B in assets under management for Ethereum ETFs in the next 18 months based on market cap weight and international ETP markets.
The launch of Ethereum ETFs is expected to be significant, with estimates ranging from $10 billion to $100 billion in assets under management (AUM) over the next 18 months. The estimates are based on market cap weight and international ETP markets. The data gathering process involves analyzing market cap ratios, open interest on exchanges, and historical performance of Bitcoin ETFs. Both Matt and Alex arrived at similar conclusions using this methodology. It's important to note that these are educated guesses and the actual inflows could vary. However, the consensus is that the demand for Ethereum ETFs will be substantial.
Crypto ETFs: The success of Bitcoin ETFs has attracted significant demand and set a new standard for crypto products, with potential for even greater demand for ETH ETFs due to its higher price and increased access on major wealth management platforms.
The success of Bitcoin ETFs has set a new standard for what's possible in the crypto space, attracting significant retail and institutional demand. The Bitcoin ETFs reached an equilibrium in terms of flows, but the next wave of demand is expected to come from increased access to these products on major wealth management platforms. The ETH ETF, which is still in the process of being launched, could potentially see even greater demand due to its higher price and the success of the Bitcoin ETFs. The analysis also suggests that underestimating the potential of crypto ETFs could be a mistake, as demand from retail and institutional investors has been stronger than anticipated.
Bitcoin, Ethereum ETFs: The launch of Bitcoin and Ethereum ETFs could bring in $15 billion over the next few years, with long-term bullish trend continuing to push prices to new all-time highs
The launch of Bitcoin and Ethereum ETFs is expected to bring significant inflows into the crypto market, potentially reaching $15 billion over the next few years. The flow of funds is predicted to accelerate as more institutional investors enter the space and wealth platforms come online. However, the short-term outlook around the launch period is uncertain, with potential for net outflows due to arbitrage opportunities. Despite this, the long-term bullish trend is expected to continue, pushing prices to new all-time highs. The estimates are based on historical data from Gold ETFs and the experience of the Bitcoin ETF launch. The estimates are considered slightly conservative due to the underestimation of tailwinds behind Ethereum, such as regulatory changes and the Dankshoorn upgrade.
ETH ETFs impact on Ethereum price: The smaller size of Ethereum ETFs relative to its market cap may result in less significant price impact compared to Bitcoin ETFs, but potential outflows could still influence the market, especially considering fee structures and ownership.
The impact of Bitcoin ETFs on Ethereum's price in the short term may be less significant than Bitcoin's due to the smaller size of Ethereum ETFs relative to its overall market cap. However, the potential outflows from Ethereum ETFs, such as Grayscale's ETHE, could still have an impact on the market, especially considering the fee structure and ownership of these funds. The demand for Ethereum as a popular investment remains strong, but the timing and magnitude of outflows from Ethereum ETFs are uncertain and could depend on factors like fee structures and hedge fund ownership. The discussion also touched upon the utility and functionality differences between Bitcoin and Ethereum, which could influence the demand for their respective ETFs. Overall, the impact of Ethereum ETFs on the Ethereum market should be closely monitored, but it may not be as straightforward as the impact of Bitcoin ETFs.
ETH-ETF impact: The ETH-ETF may have a less bearish impact on Ethereum's price compared to GBTC due to smaller size and potential incentives, potentially leading to new all-time highs above $9,000
The Ethereum Trust (ETH-ETF) may have a less bearish impact on Ethereum's price compared to the Bitcoin Trust (GBTC) due to smaller size and potential incentives. This is a non-recurring event, and the inflows to Ethereum-based ETFs are predicted to be significant, reaching up to $15 billion in the next 18 months. These inflows could potentially lead to new all-time highs for Ethereum, with prices surpassing $9,000 based on historical lessons from Bitcoin's ETF. The Uniswap extension and Cartesi's solutions for developers are also notable developments in the Ethereum ecosystem.
Ether price sensitivity: Ether's price is more sensitive to inflows due to its less liquid supply, larger use in smart contracts, and inability for ETFs to stake. Inflows can significantly impact Ether's price, but outflows before inflows could lead to a more negative short-term impact.
Ether's price sensitivity is higher than Bitcoin's due to various factors such as less liquid supply, a larger portion of Ether being used in smart contracts and bridges, and the inability for ETFs to stake Ether. This means that even smaller inflows could have a significant price impact on Ether. Furthermore, the correlation between daily net flows and daily price changes for Ether is statistically significant, indicating that inflows can influence Ether's price. However, it's important to note that outflows before inflows could lead to a more negative price impact in the short term. Despite some bearish sentiment surrounding the Ethereum ETF, the speakers remain bullish on Ether's potential price increase, with a prediction of hitting new all-time highs by the end of the year. However, it's crucial to consider that not all inflows are true inflows, as some delta neutral trades can skew the numbers.
ETH ETF inflows: Lower inflows into Ethereum ETFs might be closer to $1.5B instead of $15B due to delta neutral trading, fewer large Bitcoin holders converting, and lack of TradFi interest. Overinflated expectations and unfavorable ratios may also deter investment.
The expected inflows into Ethereum (ETH) Exchange Traded Funds (ETFs) might be significantly lower than anticipated due to various factors such as delta neutral trading, a smaller number of large holders converting their Bitcoin to ETH ETFs, and the lack of interest from traditional finance (TradFi) investors. Analyst Andrew Pozybyshev estimates that the inflows could be closer to $1.5 billion instead of the $15 billion predicted at the end of 18 months. Additionally, he raises qualitative concerns about the overinflated expectations of crypto natives regarding Ethereum and its appeal to TradFi allocators. The price-to-sales ratio and PE ratio of ETH, particularly after net issuance and inflation, may not impress traditional investors. These factors, combined, could lead to lower inflows into Ethereum ETFs than initially expected.
Crypto investing approach, ETFs: Institutional investors prioritize future use cases and demand over DCF when investing in crypto, adding uncertainty to ETF approvals could lead to industry shifts, market lull could be temporary due to upcoming ETFs and potential policy changes, large token sales unlocking could impact altcoin market, regulatory clarity a potential driver for crypto market
Institutional investors approach investing in cryptocurrencies like Ethereum differently than traditional assets, focusing more on the potential future use cases and demand rather than discounted cash flows (DCF). The SEC's review process for new ETF filings, such as VanEck's Solana ETF, adds uncertainty to the timeline but could potentially lead to a significant shift in the industry. The current market is experiencing a lull, but the upcoming Ethereum ETFs and potential policy changes could serve as catalysts for increased demand and higher prices. Additionally, the unlocking of large amounts of supply from previous token sales in 2021 and 2022 could pose challenges for the altcoin market. Overall, the industry's influence on policy and potential regulatory clarity could be a significant driver for the crypto market in the near term.
Long-term positives in crypto market: Despite short-term challenges, the crypto market has long-term positives such as political winds shifting in favor, potential institutional inflows, and Bitcoin's dominance. However, it's a risky asset and investors could lose their entire investment.
While there are short-term challenges in the crypto market, such as regulatory uncertainty and liquidity issues, there are also significant long-term positives, including the massive shift in political winds in favor of crypto and the potential for institutional inflows. Bitcoin remains a dominant player, but the altcoin space and ETF inflows are still in their early stages. Despite short-term concerns, the market has yet to fully appreciate these long-term positives, and as we approach the end of the year, the tailwinds are expected to be strong. However, it's important to remember that crypto is a risky asset and investors could lose their entire investment. The crypto market is like the Wild West, and it's not for everyone, but for those who are willing to take the risk, it could be a fun and rewarding journey.