While a litecoin (LTC) exchange-traded fund is still only theoretical, investor demand for the product could soar to $580 million if Wall Street embraces it at the same pace as it did LTC’s better-known cousin. , bitcoin.
That calculation is based on about 6% of the total bitcoin supply now locked up in a variety of ETFs. A similar performance of an LTC product would generate more than $500 million in inflows for the token, which has a similar proof-of-work consensus mechanism as BTC.
These possibilities became evident on Thursday as market participants began assessing the likelihood of LTC becoming 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 launched a litecoin ETF in October. On Thursday, the Nasdaq stock exchange filed a 19b-4 filing with the Securities and Exchange Commission, officially putting the regulator on the clock to make a decision.
Bloomberg’s Balchunas expects LTC to win SEC approval given the industry conversations he said he’s been hearing. Litecoin’s similar technical specifications to Bitcoin may also be a factor, assuming its reliance on the proof-of-work consensus mechanism means a higher likelihood of being considered a commodity.
The question is whether there is enough investor demand for a Litecoin fund to be a success or not.
“Even if demand is comparatively low, there could still be some demand,” said James Seyffart, ETF analyst at Bloomberg Intelligence. “Just because the success isn’t as crazy as Bitcoin or even Ethereum ETFs doesn’t mean it can’t be successful. The market and investors will make that 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 the history of US ETF launches.
“The key question here remains the uncertainty of investor demand for additional products and whether new crypto ETP launches will matter,” JPM analyst Kenneth B. Worthington wrote in a note on Monday.
Worthington believes that tokens beyond Bitcoin, Ethereum, or Solana often lack depth, as they “can capture incremental attention for a limited time.”
About 6% of bitcoin’s total market capitalization, which stands at a whopping $1.97 trillion, is locked up in ETFs, according to a JPMorgan report earlier this week. By comparison, ethereum (ETH) ETFs represent about 3% of ether’s $401 billion market cap.
He used this so-called “adoption rate” to determine how many inflows the proposed XRP (XRP) and Solana (SOL) ETFs could attract, which Worthington concluded could add up to a combined AUM of up to $14 billion.
Applying this calculation to Litecoin, which has a market capitalization of $9.6 billion, Canary Capital’s fund could attract between $290 million and $580 million in the first year of operations, depending on how well investors embrace the fund. .
While $290 million seems disappointing compared to the $108 billion that spot bitcoin ETFs have raised or the $12 billion that ether ETFs currently hold, it is a larger amount than the company manages. most ETFs in the US
According to Seyffart, only about 1,330 of the roughly 4,000 ETFs in the U.S. have AUM greater than $300 million.
