Whereas a litecoin (LTC) exchange-traded fund continues to be solely theoretical, investor demand for the product might soar as excessive as $580 million if Wall Road adopts it on the identical fee it did LTC’s better-known cousin bitcoin.
That calculation is predicated on the roughly 6% of bitcoin’s complete provide now locked up in quite a lot of ETFs. Comparable efficiency by a LTC product would yield greater than $500 million of inflows for the token, which has the same Proof of Work consensus mechanism to that of BTC.
These potentialities got here into focus Thursday as market individuals started sizing up the chance that LTC may turn out to be the third crypto asset to get its personal ETF within the U.S., after BTC and ETH.
Canary Capital, a brand new digital asset-focused funding agency based by former Valkyrie Funds co-founder Steven McClurg, is finest positioned to subject such a product.
It bought the ball rolling on a litecoin ETF in October. On Thursday, Nasdaq inventory alternate filed a 19b-4 doc with the Securities and Change Fee, formally placing the regulator on the clock to decide.
Bloomberg’s Balchunas expects LTC to garner SEC approval given business chatter he mentioned he’s been listening to. Litecoin’s related tech specs to bitcoin may additionally show an element, assuming their reliance on proof of labor consensus mechanism spell higher chance of being thought-about a commodity.
The query is whether or not there may be sufficient investor demand to make a litecoin fund successful or not.
“Even when demand is relatively low, it might nonetheless see some demand,” mentioned James Seyffart, ETF analyst at Bloomberg Intelligence. “Simply because the success gained’t be as loopy because the bitcoin and even the ethereum ETFs doesn’t imply that it may possibly’t achieve success. The market and traders will make that willpower.”
The bitcoin ETFs set unprecedented information of their first yr of buying and selling, with the BlackRock iShares Bitcoin Fund (IBIT) turning into probably the most profitable launch within the historical past of U.S. ETF launches.
“The important thing query right here stays the uncertainty of investor demand for extra merchandise and whether or not new crypto ETP launches will matter,” JPM analyst Kenneth B. Worthington wrote in a word on Monday.
Worthington believes that tokens past Bitcoin, Ethereum or Solana oftentimes lack depth as they “could seize incremental consideration for a restricted time.”
About 6% of bitcoin complete market capitalization, which stands at a whopping $1.97 trillion, is locked up within the ETFs, in keeping with a report by JPMorgan earlier this week. As compared, the ethereum (ETH) ETFs comprise about 3% of ether’s $401 billion market cap.
He used this so-called “adoption fee” to find out how a lot inflows the proposed XRP (XRP) and Solana (SOL) ETFs might entice which Worthington concluded might add as much as a mixed AUM of as much as $14 billion.
When making use of this calculation to Litecoin, which stands at a $9.6 billion market cap, Canary Capital’s fund might entice anyplace between $290 to $580 million within the first yr of buying and selling, relying on how effectively traders will undertake the fund.
Whereas $290 million appears disappointing in comparison with the $108 billion that the spot bitcoin ETFs have gathered or the $12 billion that the ether ETFs at the moment maintain, it’s a bigger quantity than most ETFs within the U.S. deal with.
In line with Seyffart, solely about 1,330 out of roughly 4,000 ETFs within the U.S. have an AUM higher than $300 million.
