How Bitcoin ETFs Could Hinder Ethereum’s Rise: Pantera MP

Pantera’s Cosmo Jiang underscores an overlooked drawback of Bitcoin ETFs

By: André Beganski

March 12, 2024

Wall Street’s newfound infatuation with Bitcoin ETFs isn’t all roses.

Crypto market cycles may have been consistent before, but a newly-listed clutch of Bitcoin ETFs could mean Ethereum gets largely overlooked by investors this time around, according to Pantera Capital Portfolio Manager Cosmo Jiang. 

“I don't think Ethereum is going to be the main beneficiary in the next rally,” he said in a Monday interview with Coinage. “I believe this will continue to be a pretty strong Bitcoin market and that you really have to pick your spots.”

When digital assets have surged in bull markets before, a sharp rise in Bitcoin’s price has typically been followed by an increase in other coins, such as Ethereum, as investors roll profits from one crypto into a comparatively speculative one. This time, however, a significant slice of the market’s buyers will be effectively committed to Bitcoin through spot ETFs, Jiang said.

“If you bought the Bitcoin ETF, you're not swapping from that to other tokens,” he said. “Your brokerage account doesn't connect to Coinbase or … Uniswap.”

Since spot Bitcoin ETFs were approved in the U.S. on Jan. 10, the batch of newly-listed products has attracted nearly $10 billion of inflows, with no signs of slowing down. According to CoinShares data, for example, digital asset investment products are coming off record weekly inflows, pulling in $2.7 billion as Bitcoin hit a new all-time high.

From Jiang’s perspective, the crypto market can be broken down into three distinct groups of buyers: People who are “very new to crypto” and will only ever invest in Bitcoin, crypto-native hedge funds that traffic in a plethora of coins, and those that stick to cryptocurrencies with large market capitalizations and established track records.

“There's the people who will invest in ‘safer’ large-cap names, and those are the people who will invest in Bitcoin or Ethereum,” he said. “They're choosing Bitcoin right now because that's easy to access — you have an ETF.”

Despite diminishing expectations that a spot Ethereum ETF could be approved in May — broadening investors’ exposure options — Ethereum has slightly outperformed Bitcoin this year, rising 68% and 61%, respectively, according to CoinMarketCap data. Because the two assets are tightly correlated, altcoins could eventually pump as crypto-natives diversify, Jiang said.

“In a Bitcoin-led market, the only way to ‘catch up’ is to performance-chase through altcoins,” he said. “If [Bitcoin] does start to continue to outperform Ethereum again, that's when you really start to see the altcoin renaissance because crypto-native hedge funds, which are extremely, heavily overallocated to ETH will need to start diversifying.”

Watch our full interview with Pantera’s Cosmo Jiang above, and join in co-owning Coinage by minting a membership pass today.


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