Can the success of Bitcoin ETF be replicated on Ethereum?
author:Andrew Kang
Compiled by: Xiaobai Navigation coderworld
The BTC ETF opened the door for many new buyers to allocate Bitcoin in their portfolios. The impact of the ETH ETF is less obvious.
When the Blackrock ETF application was submitted, the price of Bitcoin was $25,000. I was very bullish on Bitcoin at the time. Now Bitcoin has returned 2.6 times, while ETH has returned 2.1 times. Since the bottom of the cycle, BTC has returned 4.0 times, and ETH has also returned 4.0 times. So, how much upside can the ETH ETF bring? I don't think it will be too much unless Ethereum develops a convincing way to improve its economic efficiency.
Traffic Analysis
Bitcoin ETFs have accumulated a total of $50 billion in AUM, which is a staggering number. However, if you break down the net inflows since the launch of the Bitcoin ETF, excluding the existing GBTC AUM and rotation, the net inflows are $14.5 billion. However, this is not a true inflow, as there are many delta-neutral flows that need to be accounted for, namely basis trades (selling futures, buying spot ETFs) and spot rotations. Based on CME data and analysis of ETF holders, I estimate that about $4.5 billion of net inflows can be attributed to basis trades. ETF experts suggest that large holders such as BlockOne have also converted a large amount of spot BTC into ETFs - a rough estimate of $5 billion. Netting out these flows, we can conclude that the true net buying of Bitcoin ETFs is $5 billion.
From this we can easily extrapolate to Ethereum.@EricBalchunas Estimates suggest that Ethereum’s flow may be 10% of BTC’s. This makes for a true net buy flow of $500M in 6 months versus reported net flow of $1.5B. While Balchunas is biased in his approval odds, I believe his lack of interest/pessimism about an ETH ETF is informative and reflective of broader traditional finance interest.
Personally, my benchmark is 15%. Starting with BTC's $5 billion real net value, adjusting for ETH market cap (33% of BTC) and a 0.5 visit factor*, we get $840 million in real net buying and $2.52 billion in reported net value. There are some reasonable arguments that ETHE has less turnover than GBTC, so in an optimistic case, I think real net buying is $1.5 billion and reported net buying is $4.5 billion. This is about 30% of BTC flow.
In either case, the true net buying is far less than the derivatives flows on the ETF front ($2.8 billion), not including the spot front flow. This means that the ETF is already overpriced.
* The access factor adjusts the ETF flows because ETFs can benefit BTC significantly more than ETH due to different holder bases. For example, BTC is a macro asset and is more attractive to institutions with access issues – macro funds, pensions, endowments, sovereign wealth funds. ETH, on the other hand, is more of a technology asset and is more appealing to venture capital firms, Crpyto funds, technologists, retail investors, etc.cryptocurrencyComparing the CME OI to market cap ratios of ETH and BTC, we can deduce 50%.
From CME data, ETH had significantly less OI than BTC before the ETF was launched. OI was about 0.30% of supply, while BTC was 0.6% of supply. At first, I thought this was a sign of "prematurity", but it can also be said that this masks a lack of interest in the ETH ETF from smart trading money. Street traders make a good trade on BTC, and they tend to have good information, so if they don't repeat the trade on ETH, there must be a good reason, which may mean weak liquid intelligence.
How $5 billion took BTC from $40,000 to $65,000
The short answer is no. There are plenty of other buyers in the spot market. Bitcoin is a truly globally proven asset, a significant portfolio asset, and has many structural accumulators – Saylor, Tethers, family offices, high net worth retail investors, etc. ETH also has some structural accumulators, but I think the number is less than BTC.
Remember, Bitcoin holdings were already $69,000/1.2T+ BTC before ETFs came along. Market participants/institutions have a lot of spotcryptocurrencyCoinbase has $193 billion in custody, with $100 billion coming from its institutional program. In 2021, Bitgo reported an AUC of $60 billion and Binance has over $100 billion in custody. 6 months later, the ETF is custodial for 4% of the total Bitcoin supply, which is significant but only part of the demand equation.
Between MSTR and Tether, there have been billions of additional buys, but more than that, there have been insufficient positions entering the ETF. There was a popular view at the time that ETFs were selling news events/market tops. So billions of short, medium and long term momentum sells that need to be bought back (2x flow impact). In addition, shorts also need to be bought back once there is a big move in ETF flows. After entering the issuance phase, open positionscontractIt’s actually going down – it’s incredible.
ETH ETF 的定位则截然不同。ETH 的价格是低点的 4 倍，而 BTC 的价格是推出前的 2.75 倍。cryptocurrency原生 CEX OI 增加了 21 亿美元，使 OI 接近 ATH 水平。市场是（半）有效的。当然，许多加密货币原住民看到比特币 ETF 的成功，对 ETH 抱有同样的期望，并进行了相应的定位。
I personally think that the expectations of cryptocurrency natives are overly exaggerated and out of touch with the real preferences of transaction allocators. People who are deeply involved in the cryptocurrency field will naturally have a relatively high level of awareness and purchasing power for Ethereum.In fact, Ethereum, which is a major portfolio allocation for many non-crypto native capital, has a much lower purchase rate.
One of the most common pitches to traders is Ethereum as a “tech asset.” The world’s computer, the Web3 app store, the decentralized financial settlement layer, etc. It’s a nice pitch and one I’ve bought in previous cycles, but it’s a hard sell when you see the actual numbers.
In the last cycle, you could point to the growth rate of fees and point out that DeFi and NFTs will create more fees and cash flow, etc., and make a compelling tech investment case from a perspective similar to that of tech stocks. But in this cycle, the quantification of fees is counterproductive. Most charts will show you flat or negative growth. Ethereum is a "cash machine", but with 30d annualized revenue of $1.5 billion, a PS ratio of 300x, and a negative earnings/PE ratio after inflation, how can analysts justify this price to their dad's family office or their macro fund boss?
I even expect the first few weeks of fugazi (delta neutral) flows to be lower for two reasons. First, the approval was a surprise and the issuer didn’t have that much time to convince large holders to convert their ETH to ETF form. The second reason is that it is less attractive for holders to convert because they need to give up the yield from pegging, farming, or using ETH as collateral in DeFi. But note that the collateralization ratio is only 25.
Does this mean ETH will go to zero? Of course not, at a certain price it will be considered good value and when BTC goes up in the future it will also be dragged down to some extent. Before the ETF launches, I expect ETH to trade at $3,000-$3,800. After the ETF launches, my expectation is $2,400-$3,000. However, if BTC rises to $100,000 by late Q4/Q1 2025, then this could drag ETH to its ATH, but the ETHBTC trading pair will be lower. In the long run, the development is promising and you have to believe that Blackrock/Fink are doing a lot of work to put some financial trajectory in placeBlockchainand more assetsTokenHow much value this will bring to ETH and what the timing will be is still uncertain.
I expect the ETHBTC pair to continue to fall.Xiaobai NavigationAlthough our sample size is small, we do see ETHBTC making lower highs in each cycle, so this is not surprising.
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The article comes from the Internet:Can the success of Bitcoin ETF be replicated on Ethereum?
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