Citi Report on Potential Inflows to Spot Ether ETFs in the U.S.

Last week, Citi released a research report stating that spot ether (ETH) exchange-traded funds (ETFs) in the U.S. could witness net inflows at around 30%-35% the levels of spot bitcoin (BTC) equivalents. The report indicated a projected range of $4.7 billion to $5.4 billion in net inflows over a six-month period. However, Citi suggested that the actual inflows and the beta of ether returns relative to these flows might be lower than initially estimated.

The analysts at Citi, led by Alex Saunders, mentioned that one reason for potential lower inflows is the current lack of diversification benefits that ETH offers compared to BTC due to their distinct use-cases. Despite the upcoming availability of spot ether ETFs for trading in the U.S. following SEC approvals earlier this year, Citi pointed out that investors might view bitcoin and ether as similar enough to split their allocations between the two cryptocurrencies rather than considering them as separate assets.

• Citi highlighted that the absence of staking in ether spot ETFs could also contribute to potential disappointing flows.
• The report noted that bitcoin’s first-mover advantage led to significant inflows and strong performance before ether ETF listing approval in May.

Nevertheless, Citi mentioned a silver lining in the macroeconomic environment, suggesting that the timing of spot ether ETF launches could align with a more dovish Federal Reserve, potentially leading to lower interest rates, a robust equity market, and a weaker U.S. dollar, all of which could be supportive for the crypto market.