Investors love the tech sector, and Ethereum is one of the most exciting technology investments in the world.
Written by Matt Hougan, Chief Investment Officer at Bitwise
Compiled by Luffy, Foresight News
In last week’s investment memo, I predicted that the Ethereum ETP would bring in $15 billion in net inflows by the end of 2025. This would be a huge achievement and would make the Ethereum ETP one of the most successful ETPs ever.
However, the Ethereum ETP still cannot compare to the Bitcoin ETP, which has attracted $14 billion in net inflows less than six months after its launch. I expect this number to soar to over $50 billion by the end of 2025 as financial giants such as Morgan Stanley and Merrill Lynch join in.
In terms of market capitalization, Bitcoin is three times the size of Ethereum, so it makes sense that Bitcoin ETP attracts three times as much money as Ethereum ETP.
But something has stuck with me since I wrote that memo. If things had gone another way, the Ethereum ETP could have performed far better than I expected.
Here are the reasons.
Ethereum is like a high-growth tech stock
Naive investors (and parts of the media) lump Bitcoin and Ethereum together. It’s easy to understand why: they are the two largest crypto assets. But our readers should know that they are fundamentally different, just like gold and oil.
Bitcoin is designed to be a new type of monetary asset. It is intended to compete with gold, the dollar, and other fiat currencies as a store of value and, ultimately, a medium of exchange.
This is an exciting space. The gold market is worth over $10 trillion, and the “currency” market is the largest market in the world. If Bitcoin successfully enters these markets, its value will still increase by 10 times or more.
Ethereum is something completely different. Ethereum is structured as a technology platform: it is a fully programmable blockchain that is the cornerstone for new crypto applications such as tokenization, stablecoins, and decentralized finance.
The economics of Ethereum are simple: all else being equal, as more people use these applications, the value of ETH, the Ethereum blockchain’s asset, grows. Because you have to pay ETH to use the platform.
Leading blockchain use cases. Source: Bitwise Asset Management
Why Ethereum ETPs are outperforming expectations
This is why I suspect that the Ethereum ETP may perform as expected. After all, investors love tech stocks. Almost all investors have invested in high-growth tech stocks such as Nvidia and Meta, while relatively few investors have invested in monetary assets such as gold.
Imagine if investors sold a few tech stocks and increased their holdings of ETH, what would happen? I think investors prefer holding tech assets like Ethereum to investing in a new monetary asset.
Therefore, we need to make the core idea of Ethereum (that ETH is a technology investment) gain mainstream attention. To do this, we need to accomplish two things: 1) more people need to understand how Ethereum is different from Bitcoin; 2) some applications built on Ethereum need to gain mainstream attention.
What would that look like? Imagine stablecoin assets growing from $160 billion to $1.6 trillion as more people embrace the speed and transparency of blockchain payments; or DeFi opening up new lending channels as regulatory clarity emerges; or more companies following BlackRock’s lead and building tokenized funds on Ethereum.
Maybe investors need a new ETF that’s 10% ETH and 90% tech stocks.
