Litecoin ETF Could Soar to $580M in Inflows: Bitcoin ETFs’ Success Could Be the Key

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What to know:

  • Prospective litecoin exchange-traded funds (ETFs) could see inflows of up to $580 million if investors adopt them at the same rate as the bitcoin ETFs.
  • Roughly 6% of bitcoin’s supply is now in a variety of ETFs. A similar percentage for litecoin would yield more than $500 million of inflows for LTC ETFs.
  • Only about 1,330 out of 4,000 ETFs in the U.S. have assets-under-management over $300 million.

If an Litecoin (LTC) exchange-traded fund becomes a reality, investor interest might skyrocket up to $580 million, similar to how quickly Wall Street took to Bitcoin, LTC’s more famous counterpart.

Approximately 6% of bitcoin’s total circulation is currently tied up in various ETFs, and if Litecoin (LTC) were to exhibit comparable performance, it could attract over $500 million in investments, given its similar Proof of Work system to Bitcoin.

On Thursday, it became more apparent that Long Term Capital (LTC) could potentially be the next cryptocurrency to receive a dedicated Exchange Traded Fund (ETF) in the United States, following Bitcoin (BTC) and Ethereum (ETH). Market participants started evaluating this possibility.

In simpler terms, it can be said that since Steven McClurg, who was a founding member of the Valkyrie Funds, has now established Canary Capital – a firm specializing in investments related to digital assets, they are ideally suited to launch such a product.

In October, the process for a Litecoin ETF was initiated. This week, Nasdaq Stock Exchange submitted a 19b-4 document to the Securities and Exchange Commission, effectively starting the timer for the regulatory body to render its decision.

According to Balchunas from Bloomberg, there’s a strong possibility that Litecoin will receive approval from the SEC due to industry discussions he’s been privy to. The technical specifications of Litecoin, which are similar to Bitcoin, might also contribute to this decision, especially since both rely on a proof-of-work consensus mechanism. This could increase the chances of being classified as a commodity.

The question is whether there is enough investor demand to make a litecoin fund a success or not.

James Seyffart, an ETF analyst at Bloomberg Intelligence, noted that even if demand is relatively modest, there could still be some level of interest. He added that just because the potential success might not match that of Bitcoin or Ethereum ETFs doesn’t mean it won’t be successful at all. Instead, the market and investors will ultimately decide its fate.

In their inaugural year on the market, Bitcoin ETFs established unparalleled milestones, culminating in the BlackRock iShares Bitcoin Fund (IBIT) boasting the largest and most prosperous debut among all U.S. Exchange-Traded Fund (ETF) launches to date.

In simpler terms, the main point being discussed is whether investors will continue to show interest in purchasing more financial products related to cryptocurrencies, especially new Exchange-Traded Products (ETPs), as suggested by JPM analyst Kenneth B. Worthington in his note published on Monday.

According to Worthington, many cryptocurrencies aside from Bitcoin, Ethereum, or Solana often fail to offer substantial value because they can only attract temporary interest.

Approximately 6% of Bitcoin’s massive $1.97 trillion total value is held in Exchange-Traded Funds (ETFs), as reported by JPMorgan this week. On the other hand, ETFs constitute around 3% of Ethereum’s ($401 billion) market capitalization.

As a crypto investor, I’ve been closely following the potential impact of proposed XRP (XRP) and Solana (SOL) ETFs. To estimate the potential inflows these could attract, I’ve relied on a term called “adoption rate.” By considering this factor, Worthington predicts that these ETFs could collectively manage assets worth up to $14 billion.

If we apply this calculation to Litecoin, currently boasting a market capitalization of $9.6 billion, Canary Capital’s fund might draw investments ranging from approximately $290 million to $580 million in its initial year of trading. The exact amount depends on how successfully investors take to the fund.

Although the $290 million amassed by the new bitcoin ETF appears modest when compared to the $108 billion accumulated by spot bitcoin ETFs or the $12 billion held by ether ETFs, it’s still a substantial sum compared to most ETFs in the U.S.

Or:

The newly launched bitcoin ETF has gathered $290 million, which might seem small next to the $108 billion and $12 billion that other spot bitcoin and ether ETFs have respectively, but it’s a significant amount compared to most ETFs in the U.S.

Approximately 1,330 Exchange-Traded Funds (ETFs) out of around 4,000 available in the United States manage assets exceeding $300 million, as stated by Seyffart.

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2025-01-17 00:48