The launch of spot Ethereum ETFs has sparked renewed debate about Ethereum’s long-term value proposition and its performance relative to Bitcoin. While many in the crypto community remain bullish on ETH, a growing number of institutional voices are sounding caution. Among them is Andrew Kang, co-founder of Mechanism Capital, who presents a compelling bearish thesis: ETH/BTC could continue declining over the next 12 months, potentially reaching a range between 0.035 and 0.06.
This forecast isn’t based on sentiment alone—it’s rooted in structural differences between Bitcoin and Ethereum, ETF inflow dynamics, and divergent institutional demand patterns.
Spot ETF Inflows: A Closer Look at the Numbers
The success of Bitcoin spot ETFs has been undeniable. As of mid-2025, these products have amassed over $50 billion in assets under management (AUM). But appearances can be deceiving.
When we strip out flows related to Grayscale’s GBTC conversions, the net new capital inflow drops significantly—to approximately $14.5 billion. Even this figure overstates true organic demand.
A substantial portion of remaining inflows stems from delta-neutral trading strategies, including:
- Basis trades: Simultaneously buying ETF shares while shorting Bitcoin futures.
- Spot rotation: Institutions selling direct BTC holdings and reallocating into ETFs for operational convenience.
Analysis of CME data and ETF holder behavior suggests around $4.5 billion in basis trades and an estimated $5 billion in spot rotation by major players like BlockOne. After removing these non-directional flows, real net inflows into Bitcoin ETFs amount to roughly $5 billion.
This number becomes the baseline for assessing Ethereum ETF potential.
Projecting Ethereum ETF Demand
Bloomberg analyst Eric Balchunas estimates Ethereum spot ETF inflows will reach about 10% of Bitcoin’s in the first six months. Based on our adjusted Bitcoin inflow model, that translates to:
- Reported inflows: ~$1.5 billion
- Actual net inflows: ~$500 million
While Balchunas has had misses in past regulatory predictions, his conservative stance reflects broader skepticism among traditional finance (TradFi) institutions about Ethereum as a core holding.
My base case assumes a slightly higher adoption rate—15% of Bitcoin’s ETF inflow, adjusted for Ethereum’s market cap (~33% of BTC) and a critical variable: the access factor.
What Is the Access Factor?
The access factor accounts for differences in how easily various investor types can buy crypto assets directly:
- Bitcoin is increasingly seen as a macro asset—appealing to pension funds, sovereign wealth funds, and macro hedge funds. For many of these entities, direct custody remains challenging, making ETFs a primary access point.
- Ethereum, by contrast, is often categorized as a "tech asset," already widely held by venture capital firms, crypto-native funds, and retail investors who face fewer barriers to direct ownership.
By comparing CME open interest ratios to market caps, we estimate Ethereum’s access factor at 50%—meaning only half as many marginal buyers will rely on ETFs compared to Bitcoin.
Applying this model yields:
- Real net inflow: $840 million
- Reported inflow: $2.52 billion
Under an optimistic scenario—with limited ETHE supply driving arbitrage demand—real net inflows could reach $1.5 billion, or about 30% of Bitcoin’s ETF-driven flow.
Still, even this upper bound pales in comparison to pre-ETF derivatives activity. The ETH derivatives market absorbed $2.8 billion in new open interest ahead of the ETF launch—excluding spot frontrunning—suggesting much of the expected demand was already priced in.
Why Institutional Demand for ETH Lags Behind BTC
One key reason ETH may underperform lies in market structure.
Before the Bitcoin ETF launch, BTC open interest on CME was about 0.6% of total supply—a sign of strong speculative positioning by informed traders. For ETH, that figure stands at just 0.3%, despite Ethereum being further along its development curve.
This discrepancy implies that professional traders—who profit from accurate information—did not position as aggressively for ETH ETF approval as they did for BTC. Their restraint may reflect lower confidence in sustained institutional buying post-launch.
Moreover, when Bitcoin ETFs launched, BTC was trading at ~2.75x its cycle low. At the time of ETH ETF speculation, Ethereum had already surged to 4x its low, with native exchange OI increasing by $2.1 billion—near all-time highs.
In other words, much of the bullish momentum came from crypto-native traders expecting a repeat of the BTC ETF rally. But their enthusiasm may not align with actual TradFi appetite.
Can $5 Billion Really Move Bitcoin?
Some argue that $5 billion in real net inflows couldn’t possibly push BTC from $40K to $65K. The truth? It didn’t do it alone.
Bitcoin’s price surge was fueled by a broader shift: it has become a globally recognized store of value with deep institutional ownership.
Examples include:
- MicroStrategy holding over 200,000 BTC
- Tether’s significant BTC reserves
- Family offices and high-net-worth individuals accumulating through custodians like Coinbase and Bitgo
Coinbase alone holds $193 billion in assets, with $100 billion from institutions. Bitgo reported $60 billion in custodied assets; Binance exceeds $100 billion.
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After six months, Bitcoin ETFs held only 4% of total BTC supply—a meaningful milestone, but still a small slice of overall demand.
The ETH Narrative Problem
Proponents often pitch Ethereum as a “tech stock” of crypto—a global computer powering Web3 apps, DeFi, and NFTs. In past cycles, rising transaction fees supported this narrative.
But today? Fee growth has stalled or turned negative. Ethereum generates around $150 million per month in revenue—impressive, but with a price-to-sales ratio near 300x and negative earnings.
How do traditional analysts justify such multiples to risk-off clients?
Furthermore, unlike BTC, ETH holders have strong incentives not to shift into ETFs:
- Loss of staking yield (~3–5% APY)
- Inability to use ETH in DeFi protocols
- No participation in governance or future airdrops
With only ~25% of ETH supply staked, there’s still room for on-chain utility to compete with passive ETF ownership.
Price Outlook: ETH/BTC Heading Lower
Does this mean ETH is going to zero? Absolutely not. At certain valuations, Ethereum remains a valuable asset—and will likely rise alongside BTC during broader bull markets.
However, its relative performance may continue to weaken.
Pre-ETF, I expected ETH to trade between $3,000–$3,800. Post-ETF approval, that range adjusts downward to $2,400–$3,000, assuming stable BTC prices.
If BTC rallies to $100K by late 2025 or early 2026, ETH could briefly break new nominal highs—but likely at a lower BTC-denominated price.
Historically, each cycle sees lower highs in the ETH/BTC pair:
- 2017 peak: ~0.14
- 2021 peak: ~0.08
- 2025? Possibly sub-0.06
This trend suggests diminishing relative strength—a pattern poised to continue absent fundamental improvements in Ethereum’s economic model.
Frequently Asked Questions (FAQ)
Q: Why would ETH/BTC keep falling if both assets go up?
A: Because Bitcoin is increasingly viewed as digital gold with stronger institutional demand, while Ethereum faces competition from Layer 1 rivals and lacks comparable adoption outside crypto-native circles. Even if both rise in USD terms, BTC can outpace ETH.
Q: Can Ethereum improve its economic model to reverse this trend?
A: Yes—but it requires sustained fee growth via mass adoption of rollups, enterprise usage, or breakthrough applications. Until then, high valuations remain hard to justify to traditional investors.
Q: Are spot ETFs bad for Ethereum?
A: Not inherently. They provide regulated access but may cannibalize staking and DeFi participation without bringing enough new capital to offset the shift.
Q: What would change your bearish outlook on ETH/BTC?
A: Strong evidence of institutional adoption beyond speculation—such as pension fund allocations, consistent fee growth above 20% YoY, or major enterprise integration on Ethereum mainnet.
Q: Is this prediction based on technical analysis?
A: No—it's primarily driven by on-chain data, institutional flow analysis, and macrostructural comparisons between BTC and ETH ecosystems.
Q: Could regulatory clarity boost ETH more than expected?
A: Possibly. If regulators clearly distinguish ETH from securities, it could unlock new fund structures. But even then, access and utility limitations remain hurdles.