Ether Spot ETFs Could See Up to $5.4B of Net Inflows in First 6 Months: Citi

• Ether spot ETFs net inflows are likely to be 30%-35% of bitcoin equivalents, the report said.

• Citi said this gives a range of $4.7 billion-$5.4 billion of potential net inflows into ether ETFs over six months.

• Flows could underwhelm due to a lack of staking and bitcoin’s first-mover advantage, the bank said.

Spot ether (ETH) exchange-traded funds (ETFs) in the U.S. could see net inflows at just 30%-35% the levels of spot bitcoin (BTC) equivalents, with distribution skewed to the downside, Citi (C) said in a research report last week.

That level gives a range of $4.7 billion to $5.4 billion of net inflows over six months, the report said. Morever, the inflows and the beta of ether returns relative to such flows could be lower than the analysis suggests, the bank said.

“One reason is that while ETH may offer diversification benefits in the long-term, given its different and more extensive set of use-cases, this is currently not the case,” analysts led by Alex Saunders wrote.

Spot ether ETFs are about to become available for trading in the U.S. after the Securities and Exchange Commission (SEC) greenlighted filings from issuers earlier in the year. They are expected to begin trading next week.

Investors who would likely buy spot ETFs, as opposed to the respective tokens, may view bitcoin and ether as similar enough to split their allocations between the two cryptocurrencies, rather than viewing them as distinct assets, Citi said. That means ether may see flows that had been earmarked for bitcoin ETFs rather than additional allocations.

The bank noted that another reason that flows could disappoint is due to the lack of staking in ether spot ETFs.

Bitcoin also benefits from first-mover advantage, which saw billions of dollars of inflows and strong BTC outperformance prior to ether ETF listing approval in May, the bank said.

Still, it’s not all doom and gloom. The timing of spot ether ETF launches may align with an increasingly dovish Federal Reserve which could mean lower interest rates, a stronger equity market and a weaker U.S. dollar, and that is a macroeconomic environment that could be supportive for crypto, the report said.