Whereas a litecoin (LTC) exchange-traded fund remains to be solely theoretical, investor demand for the product may soar as excessive as $580 million if Wall Avenue adopts it on the similar price it did LTC’s better-known cousin bitcoin.
That calculation is predicated on the roughly 6% of bitcoin’s whole 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 an analogous Proof of Work consensus mechanism to that of BTC.
These prospects got here into focus Thursday as market contributors started sizing up the chance that LTC would possibly turn into 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 obtained the ball rolling on a litecoin ETF in October. On Thursday, Nasdaq inventory change filed a 19b-4 doc with the Securities and Alternate Fee, formally placing the regulator on the clock to decide.
Bloomberg’s Balchunas expects LTC to garner SEC approval given trade chatter he stated he’s been listening to. Litecoin’s comparable 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’s sufficient investor demand to make a litecoin fund a hit or not.
“Even when demand is relatively low, it may nonetheless see some demand,” stated 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 will possibly’t achieve success. The market and buyers will make that willpower.”
The bitcoin ETFs set unprecedented data of their first 12 months 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 added merchandise and whether or not new crypto ETP launches will matter,” JPM analyst Kenneth B. Worthington wrote in a observe on Monday.
Worthington believes that tokens past Bitcoin, Ethereum or Solana oftentimes lack depth as they “might seize incremental consideration for a restricted time.”
About 6% of bitcoin whole market capitalization, which stands at a whopping $1.97 trillion, is locked up within the ETFs, in line 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 price” to find out how a lot inflows the proposed XRP (XRP) and Solana (SOL) ETFs may appeal to which Worthington concluded may 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 may appeal to wherever between $290 to $580 million within the first 12 months of buying and selling, relying on how effectively buyers 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 keeping with Seyffart, solely about 1,330 out of roughly 4,000 ETFs within the U.S. have an AUM higher than $300 million.
