Why Bitcoin, Ether ETFs Can Carry Bitcoin to $100K: Bitwise CIO

Despite a recent Bitcoin selloff, ETF inflows have held strong to continue the most talked about narrative this year: Bitcoin is growing up as an asset class.

More than $15 billion has flowed into Bitcoin ETFs this year, and soon Ethereum is set to join Bitcoin as the only other cryptocurrency to also boast active ETFs in the US. Expectations are that anywhere from $3 billion to $5 billion or more may soon flow into the funds offered by various issuers.

In a new interview with Coinage, Matt Hougan, Chief Investment Officer at one of those issuers (Bitwise) shared his thoughts on the importance of Ethereum ETFs coming to market and Bitcoin ETFs accelerating in the back half of 2024. Shaking off the recent cooling off in excitement, Hougan remains optimistic about the long-term prospects of Bitcoin ETFs.

"Most ETF investors still have 0% Bitcoin exposure," he said. "What that tells me is that these investors need to move more than $1 trillion into this market, even at today's prices, just to normalize this with other stocks, bonds, real estate, commodities, every other asset in the world. The $15 billion is great, it's a record, but it's 1 or 2% of what we need to see over the next three, five, or 10 years."

This early phase suggests a significant growth potential as more investors diversify their portfolios with Bitcoin. Hougan expects that within three years, 1 to 5% of most ETF investors' portfolios will include Bitcoin and that the asset will attract major wealth platforms like Morgan Stanley and Wells Fargo, which are yet to participate meaningfully in this market. He anticipates strong inflows in the latter half of 2024 and even greater numbers in 2025, suggesting a long runway for growth.

"Money is like water; it finds a way," he said, highlighting the interest among major banks to begin participating in digital asset custody. While the House this week was unable to override President Biden's veto to repeal the SEC accounting rule that had prevented that from being possible, some major banks did receive permission around the rule. Goldman Sachs also plans to launch multiple tokenization projects.This shift likely marks the transition of Bitcoin from a niche, retail-dominated asset to a mainstream institutional asset.

Hougan is equally bullish on the forthcoming Ethereum ETFs, which he believes will complement rather than compete with Bitcoin ETFs. He shared an anecdote from an advisory platform CEO who expressed comfort in diversifying into both Bitcoin and Ethereum. This diversification aligns with the traditional investment principles of indexing and diversification, potentially accelerating the inflows into Bitcoin ETFs as well.

"If you look at Europe, with their Bitcoin and Ethereum ETFs, guess what? They're both successful," he said. "If you look in Canada with their Bitcoin and Ethereum ETFs, guess what? They're both successful. If you look on Coinbase where people can buy Bitcoin and Ethereum, guess what? They buy both."

Looking ahead, Hougan expects substantial inflows into Ethereum ETFs once launched. He predicts $15 billion in net inflows within the first 18 months. He cautioned that the initial weeks might see volatility due to existing assets in the Grayscale Ethereum Trust, but he remains confident in the long-term growth.

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