According to a research report by Citi, spot Ethereum (ETH) exchange-traded funds (ETFs) in the US are expected to see significantly lower net inflows compared to their Bitcoin (BTC) counterparts. The bank estimates that net inflows into spot Ethereum ETFs will be only 30% – 35% of those for Bitcoin, with inflows ranging between $4.7 billion and $5.4 billion within six months. This forecast is primarily due to various factors that may limit investor interest in spot Ethereum ETFs.
Potential Reasons Limiting Investor Interest
Citi identified the lack of staking opportunities in spot Ethereum ETFs as one of the main reasons for the expected low cash inflows. Unlike Bitcoin, which has benefited from significant inflows and superior performance since the approval of spot ETFs, Ethereum does not offer staking advantages within these financial products. This may deter investors looking to earn additional returns through staking.
Moreover, Bitcoin’s first-mover advantage also plays a significant role. Spot Bitcoin ETFs were approved earlier and have already started trading, attracting a large portion of investor interest and capital. This early approval has allowed Bitcoin to establish a dominant position in the market that spot Ethereum ETFs cannot easily replicate.
Citi also pointed to the perceived similarity between Bitcoin and Ethereum among investors likely to purchase spot ETFs. The bank believes these investors may split their allocations between the two cryptocurrencies rather than treating them as separate assets. This approach could result in ETH capturing some funds that might otherwise be allocated to Bitcoin, rather than attracting entirely new capital.
“ETFs Arrive at an Opportune Time”
Despite these issues, the launch of spot Ethereum ETFs in the US appears to be happening at a potentially opportune time. The US Securities and Exchange Commission (SEC) recently approved issuers’ applications, and at least one ETF is expected to start trading next week. This timing coincides with a potentially dovish stance by the Fed, which could lead to lower interest rates, a stronger stock market, and a weaker US dollar. Such a macroeconomic environment could be supportive of cryptocurrencies, including ETH.
Citi added that while ETH offers diversification advantages due to its unique and comprehensive use cases, this potential is not currently reflected in investor behavior. However, the bank believes that as the market develops and investors become more familiar with ETH’s distinct advantages, inflows into spot Ethereum ETFs could increase.
