Ether (ETH) Spot ETFs Could See $5B of Net Inflows in the First Five Months: Galaxy

Ether is more price sensitive to ETF inflows than bitcoin due to the large amount of ETH total supply that is locked up, the report said.

(CoinDesk) – Ether spot exchange-traded funds (ETFs), once approved for trading, could see $1 billion of net inflows a month, Galaxy (GLXY) Research said in a report on Wednesday.

“We expect the net inflows into ETH ETFs to be 20-50% of the net inflows into BTC ETFs over the first five months, with 30% as our target, implying $1 billion/month of net inflows,” analyst Charles Yu wrote.

Ether ETFs are finally closing in on being available for U.S. traders after the Securities and Exchange Commission (SEC) approved Chapter 44 applications from several applicants last month. The regulator must also sign off on their S-1 filings before the products are cleared to trade. Spot bitcoin ETFs launched in the U.S. in January.

Like the bitcoin (BTC) spot ETFs, the new demand for the ether versions will come from independent investment advisors or broker/dealer platforms, the report said.

However, ether will be more price sensitive to ETF inflows than bitcoin due to the large amount of ETH total supply that is locked up in staking, bridges, smart contracts and the lower amount held on centralized exchanges, Galaxy said.

Galaxy cautioned that spot ether ETF demand may be limited due to the lack of staking rewards.

Outflows from the Grayscale Ethereum Trust (ETHE) will also likely be a drag on ether ETF inflows, and Galaxy estimates that these negative flows could be about 319,000 ETH per month or $1.1 billion. Still, due to the smaller percentage of ether held in these trusts the “ETHE ETF conversion will be a relatively smaller drag on ETH price relative than the Grayscale Bitcoin Trust (GBTC) conversion.”

Unlike GBTC, ETHE is not faced with forced selling due to bankruptcy from the likes of 3AC and Genesis, which supports the notion that ether will see less selling pressure related to Grayscale trusts than bitcoin, the report added.

The SEC could approve spot ether ETFs as soon as July 4, according to a Reuters report on Thursday.