Galaxy said spot ether ETFs could see $5 billion of net inflows in the first five months.
Demand for the new products is expected to come from independent investment advisors and broker/dealer platforms.
The lack of staking rewards could limit demand for these spot ETFs, the report said.
Ether (ETH) 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 close to becoming available for trading in the U.S. after the Securities and Exchange Commission (SEC) approved filings from applicants last month. The regulator must also approve their S-1 filings before the products are cleared to trade. Spot bitcoin ETFs launched in the U.S. in January.
Similar to the bitcoin (BTC) spot ETFs, new demand for the ether versions is expected to come from independent investment advisors or broker/dealer platforms, the report said.
Ether will be more price sensitive to ETF inflows than bitcoin due to the amount of total supply of ETH that is locked in staking, bridges, and 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.
