Spot Ethereum ETFs could absorb over 1 million ETH in first 5 months: K33

New spot Ethereum ETH +0.72% exchange-traded funds in the U.S. could attract between $3.1 billion and $4.8 billion in net inflows over the first five months of trading, according to analysts at K33 Research.

The analysts' estimates are based on market sizing comparisons between bitcoin and ether, K33 Senior Analyst Vetle Lunde and DeFi analyst David Zimmerman said in a Tuesday report .

Some 3.3% of ether’s circulating supply currently sits in investment vehicles and has been on a steady downtrend since the November 2021 crypto bull market peak, according to the analysts. That mirrors a similar trend for bitcoin held in investment vehicles, dropping to 4.1% ahead of the spot Bitcoin ETF launch hype. Bitcoin exchange-traded products have since grown to 5.6% of the circulating supply, according to K33.

Globally, existing Ethereum ETPs hold 28.2% of the assets under management held by their Bitcoin counterparts, excluding the U.S. spot Bitcoin ETFs, the analysts added, and in Canada and Europe, that figure is roughly 33%.

While U.S. Ethereum futures ETFs reduce that global figure, accounting for just 5% of their Bitcoin counterparts, Lunde and Zimmerman argue this is caused by the mismatch in the timing of the respective launches rather than being representative of investment demand.

“The thesis of futures ETFs being a nonrepresentative outlier is strengthened by CME’s ETH open interest, currently sitting at 22.9% of the size of BTC, while averaging a 35% share of BTC futures since its launch, indicative of significant institutional demand for ETH in the United States,” the analysts added.

ETH ETP AUM and CME OI compared to BTC ETPs and CME. Image: K33 Research .

RELATED INDICES

Applying weights from those comparable markets to the spot Bitcoin ETF's combined $14 billion in net inflows since they launched in January, K33’s estimate suggests the spot Ethereum ETFs could accumulate between 800,000 ETH and 1.26 million ETH in their first five months — equivalent to between 0.7% and 1.05% of the circulating ether supply.

Estimated Five-month net flows to ETH ETFs based on various scenarios. Image: K33 Research .

‘Still not betting against Fink’

The U.S. Securities and Exchange Commission approved 19b-4 forms for eight spot Ethereum ETFs from firms like BlackRock and Fidelity on May 23. However, the issuers still need to have their S-1 registration statements go effective before trading can begin, a process that could take weeks.

The analysts said they were “still not betting against [Larry] Fink,” with the BlackRock CEO’s “Midas touch” on ether creating a setup for relative strength for the asset throughout the summer.

“Such significant supply absorption will likely lead to price appreciation in ETH, per the strong relationship witnessed between BTC ETF flows and returns throughout the year,” they added.

The new spot Ethereum ETFs will not accrue staking reward yields upon launch, a seemingly crucial factor in their approval by the SEC. While some argue the lack of staking would lead to lower demand given the opportunity cost, the K33 analysts disagreed.

“More than 98% of the European and Canadian ETH ETF AUM sits in non-staked ETPs. This indicates that a lack of staking is far from a dealbreaker among ETP investors,” they said.