The Tech Play: Why Ethereum ETPs Could Be More Successful Than You Think

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By Matthew Hougan

In last week’s CIO Memo, I argued that Ethereum ETPs would gather $15 billion in net flows by the end of 2025. That would be a massive haul, putting Ethereum ETPs near the top of the all-time list for most successful ETP launches.

It would not, however, match the success of bitcoin ETPs.

Bitcoin ETPs have already pulled in $14 billion in net flows after less than six months on the market. I expect that number to swell to north of $50 billion by the end of 2025, as bitcoin ETPs are approved on large platforms like Morgan Stanley and Merrill Lynch.

By market capitalization, bitcoin is 3x the size of Ethereum, and it’s better known, so it makes sense that bitcoin ETPs would draw three times the flows of Ethereum products. 

But something has been stuck in the back of my mind since I wrote that CIO Memo. If things break a certain way, I think Ethereum ETPs could vastly outperform my expectations.

Here’s why.

A High-Growth Technology Play

Naive investors (and parts of the media) lump Bitcoin and Ethereum together. And it’s understandable why: They’re the two largest crypto assets. But readers of this memo know that they are as different as gold and oil.

By design, Bitcoin is structured as a new monetary asset. It aims to compete with gold, the U.S. dollar, and other fiat currencies as both a store of value and (eventually) as a medium of exchange.

This is an exciting arena. Gold is a more than $10 trillion market, and the market for “money” is the largest in the world. Bitcoin’s value could easily jump 10x or more if it successfully penetrates these markets.

Ethereum is wholly different. Ethereum is structured as a technology platform: It is a fully programmable blockchain that serves as the backbone for new crypto-based applications, like tokenization, stablecoins, and decentralized finance.

And the economics of Ethereum are simple: Other things equal, as more people use these applications, the value of ETH—the asset that powers the Ethereum blockchain—grows. That’s because you have to pay a fee in ETH in order to use the platform.

The Leading Blockchain by Use Case

Why Ethereum ETPs Could Outperform Expectations

This is where my sneaking suspicion comes in that Ethereum ETPs could surprise to the upside. After all, investors love technology stocks. Nearly all investors have exposure to high-growth tech plays like Nvidia and Meta, and relatively few have exposure to monetary assets like gold.

It’s pretty easy for me to imagine investors selling a small amount of their tech exposure and adding ETH. I’d argue it’s easier than imagining investors carving out an entirely separate portfolio sleeve for a new monetary asset.

For this to happen, we need the core idea—that ETH is a technology investment—to gain mainstream traction. And for that to happen, you need to see two things: 1) More people need to understand how Ethereum differs from Bitcoin, and 2) some of the applications built on Ethereum need to gain mainstream traction.

What might that look like? Imagine stablecoins going from $160 billion to $1.6 trillion in assets as more people embrace the speed and transparency of blockchain-enabled payments. Or consider decentralized finance applications opening up new avenues for lending and borrowing with the onset of regulatory clarity. Or imagine more firms following BlackRock’s lead and building tokenized funds on the Ethereum platform. Sure bets? Of course not. But you don’t have to strain that hard to picture it.

Maybe someone needs to launch a new ETF that’s 10% ETH and 90% tech stocks. As a starting point for the future of technology, you could do a lot worse.

Risks and Important Information

No Advice on Investment; Risk of Loss: Prior to making any investment decision, each investor must undertake its own independent examination and investigation, including the merits and risks involved in an investment, and must base its investment decision—including a determination whether the investment would be a suitable investment for the investor—on such examination and investigation.

Crypto assets are digital representations of value that function as a medium of exchange, a unit of account, or a store of value, but they do not have legal tender status. Crypto assets are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies, stocks, or bonds.

Trading in crypto assets comes with significant risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks and risk of losing principal or all of your investment. In addition, crypto asset markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing.

Crypto asset trading requires knowledge of crypto asset markets. In attempting to profit through crypto asset trading, you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial crypto asset trading. Crypto asset trading can lead to large and immediate financial losses. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price.

The opinions expressed represent an assessment of the market environment at a specific time and are not intended to be a forecast of future events, or a guarantee of future results, and are subject to further discussion, completion and amendment. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein.