Litecoin (LTC) ETF Could Attract Up To $580M Of Inflows If Adoption Mirrors Bitcoin (BTC) ETFs
While a litecoin (LTC) exchange-traded fund is still theoretical, investor demand for the product could rise as high as $580 million if it were to be adopted by Wall Street at the same rate it did to LTC’s better-known cousin that bitcoin.
That calculation is based on roughly 6% of the total bitcoin supply now locked up in various ETFs. A similar performance of an LTC product will generate more than $500 million of inflows for the token, which has a similar Proof of Work consensus mechanism to BTC.
These possibilities came into focus on Thursday as market participants began weighing the possibility that LTC could become the third crypto asset to get its own ETF in the US, after BTC and ETH.
Canary Capital, a new digital asset-focused investment firm founded by former Valkyrie Funds co-founder Steven McClurg, is best positioned to issue such a product.
It got the ball rolling on a litecoin ETF in October. On Thursday, the Nasdaq stock exchange filed a 19b-4 document with the Securities and Exchange Commission, officially putting the regulator on the clock to make a decision.
Balchunas by Bloomberg expected LTC to get SEC approval because of the industry chatter he said he was hearing. Litecoin’s similar tech specs to bitcoin may also prove a factor, assuming their reliance on a proof of work consensus mechanism is more likely to be considered a commodity.
The question is whether there is enough investor demand to make a litecoin fund successful or not.
“Even if demand is relatively low, it could still see some demand,” said James Seyffart, ETF analyst at Bloomberg Intelligence. “Just because success won’t be as crazy as bitcoin or even ethereum ETFs doesn’t mean it can’t be successful. The market and investors will make the determination.”
Bitcoin ETFs set unprecedented records in their first year of trading, with the BlackRock iShares Bitcoin Fund (IBIT) becoming the most successful launch in US ETF launch history.
“The key question here remains the uncertainty of investor demand for additional products and whether new crypto ETP launches are valuable,” JPM analyst Kenneth B. Worthington wrote in a note on Monday.
Worthington believes that tokens beyond Bitcoin, Ethereum or Solana often lack depth because they “may get more attention for a limited time.”
About 6% of bitcoin’s total market capitalization, which is huge $1.97 trillionare locked into ETFs, according to a JPMorgan report earlier this week. In comparison, the ethereum (ETH) ETF is made up of about 3% of ethers $401 billion market cap.
He used the so-called “adoption rate” to determine how many inflows the proposed XRP (XRP) and Solana (SOL) ETFs could attract that Worthington concluded could add up to a combined AUM of up to $14 billion.
When this calculation is applied to Litecoin, which stands at a $9.6 billion market capCanary Capital’s fund could attract anywhere between $290 to $580 million in the first year of trading, depending on how well investors adopt the fund.
While $290 million seems disappointing compared to the $108 billion that spot bitcoin ETFs have amassed or the $12 billion currently held by ether ETFs, it’s a larger amount than most ETFs hold in the US.
According to Seyffart, only about 1,330 of the roughly 4,000 US ETFs have AUM of more than $300 million.
