Analyst Scott Melkar took to his latest video and said that the market is dipping due to the summer slowdown, but major positive changes are ahead for the crypto industry. One key development is the launch of the Ethereum spot ETF. Bitwise CIO Matt Hougan, who joined Melkar for a conversation, predicts that these ETFs could attract up to $15 billion in the first 18 months.
First, he noticed that people weren’t excited about these Ethereum ETFs. Hougan saw random predictions online suggesting they would fail or not attract assets. However, when looking at markets in Europe, Canada, Coinbase, and Binance, investors consistently choose to invest in Ethereum. He didn’t see why it would be any different here.
The second reason was a conversation with the head of a $100+ billion advisory firm. This firm had been hesitant to invest in Bitcoin because it’s only one asset and they prefer diversification. The head mentioned that as soon as there’s an Ethereum ETP, they’ll be comfortable investing.
Hougan realized that the default assumption should be that these ETPs will succeed, mirroring the success proportionate to Bitcoin and Ethereum in the market. After analyzing data, he concluded that $15 billion in investment within the first 18 months is a reasonable prediction, though it could be higher or lower.
He added that it was shocking to him that the narrative of high correlation persisted. He explained that crypto was only correlated for 5% of its history, specifically during a period when the Fed made historic interest rate adjustments and implemented the largest QE ever.
Naturally, everything was correlated for a few months, but 95% of the time, crypto was not correlated. He emphasized that adding crypto to a portfolio and rebalancing leads to higher risk-adjusted returns, higher returns, and the same or lower volatility.
“If you want to underweight crypto, great, but if you don’t have crypto, you’re missing a big chunk of the market. It would be like owning the market but not owning Nvidia, and no one would want to do that today,” Hougan said.
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