Bitwise Chief Investment Officer: Why Ethereum ETP Performance May Exceed Expectations?

Author: Matt Hougan, Chief Investment Officer of Bitwise

Compiled by: Luffy, Foresight News

In last week's investment memo, I predicted that Ethereum ETPs would bring in $15 billion in net inflows by the end of 2025. This would be a tremendous achievement, making Ethereum ETPs one of the most successful ETPs of all time.

However, Ethereum ETPs still cannot compare to Bitcoin ETPs. In less than six months since its launch, Bitcoin ETPs have already attracted $14 billion in net inflows. I expect this number to soar to over $50 billion by the end of 2025, especially with the involvement of financial giants like Morgan Stanley and Merrill Lynch.

In terms of market capitalization, Bitcoin is three times the size of Ethereum, so it is reasonable that the funds attracted by Bitcoin ETPs are three times that of Ethereum ETPs.

But since I wrote that memo, some thoughts have lingered in my mind. If things were to develop differently, the performance of Ethereum ETPs could far exceed my expectations.

Here’s why.

Ethereum is like a high-growth tech stock

Naive investors (and some media) often conflate Bitcoin and Ethereum. The reason is easy to understand: they are the two largest crypto assets. But our readers should know that they are fundamentally different, much like gold and oil.

By design, Bitcoin is a new type of monetary asset. It aims to compete with gold, the dollar, and other fiat currencies as a store of value and ultimately as a medium of exchange.

This is an exciting space. The gold market is valued at over $10 trillion, and the "currency" market is the largest market in the world. If Bitcoin successfully enters these markets, its value could still rise tenfold or more.

Ethereum, on the other hand, is entirely different. Ethereum's structure is a technology platform: it is a fully programmable blockchain and the cornerstone of new crypto applications such as tokenization, stablecoins, and decentralized finance.

The economic principle of Ethereum is simple: all else being equal, as more people use these applications, the value of the asset ETH on the Ethereum blockchain will grow. This is because you must pay ETH to use the platform.

Leading blockchain use cases, source: Bitwise Asset Management

Why Ethereum ETP's performance may exceed expectations

This is why I suspect that the performance of Ethereum ETPs may exceed expectations. After all, investors love tech stocks. Almost all investors are invested in high-growth tech stocks like Nvidia and Meta, while there are relatively fewer investors in monetary assets like gold.

Imagine if investors sold a small amount of tech stocks and increased their holdings in ETH. I believe that investors would prefer to hold a tech asset like Ethereum rather than invest in a new monetary asset.

Therefore, we need to bring the core idea of Ethereum (that ETH is a technology investment) into mainstream attention. To do this, we need to accomplish two things: 1) We need to make more people aware of the differences between Ethereum and Bitcoin; 2) Some applications built on Ethereum need to gain mainstream attention.

What might that look like? One can imagine that as more people embrace the speed and transparency of blockchain payments, the assets of stablecoins could increase from $160 billion to $1.6 trillion; or DeFi could open new lending channels as regulatory clarity emerges; or more companies could follow BlackRock's lead in establishing tokenized funds on Ethereum.

Perhaps investors need a new ETF, where 10% is ETH and 90% is tech stocks.