Litecoin ETF Could Attract Up to $580M of Inflows If Adoption Mirrors That of Bitcoin ETFs

Litecoin ETF Could Attract Up to $580M of Inflows If Adoption Mirrors That of Bitcoin ETFs

Litecoin ETF Could Attract Up to $580 Million in Inflows, Canary Capital Leading the Charge

By Helene Braun | Edited by Stephen Alpher
Jan 16, 2025, 9:33 p.m. UTC

What You Need to Know:

• A Litecoin (LTC) ETF could potentially see inflows of up to $580 million if it gains traction like Bitcoin ETFs.
• About 6% of Bitcoin's total supply is now locked in various ETFs, suggesting similar inflows could happen for Litecoin.
• Canary Capital, a digital asset-focused firm, is positioned to be the first to issue a Litecoin ETF.

Although still in the conceptual stage, a Litecoin (LTC) exchange-traded fund (ETF) could attract up to $580 million in investor inflows if it is adopted by Wall Street at the same pace as Bitcoin ETFs. This estimate is based on the adoption rate of Bitcoin ETFs, which currently hold about 6% of Bitcoin’s total supply, a percentage that, if replicated by a Litecoin ETF, would yield substantial capital inflows.

Litecoin shares many technological similarities with Bitcoin, notably its Proof of Work consensus mechanism, making it a plausible candidate for a successful ETF. The excitement surrounding a potential Litecoin ETF has grown in recent days as the likelihood increases that LTC could become the third cryptocurrency, after Bitcoin (BTC) and Ethereum (ETH), to be granted its own ETF in the U.S.

Canary Capital, a new digital asset investment firm founded by Steven McClurg, the former co-founder of Valkyrie Funds, appears to be the front-runner in launching the Litecoin ETF. The firm initiated the process in October, and this past Thursday, Nasdaq filed a 19b-4 document with the U.S. Securities and Exchange Commission (SEC), setting a timeline for the regulatory approval process.

Industry experts, including Bloomberg’s Eric Balchunas, believe Litecoin’s similarity to Bitcoin could increase the likelihood of approval, with the asset’s Proof of Work mechanism potentially classifying it as a commodity, much like Bitcoin. This could pave the way for a favorable SEC decision.

The key question surrounding the Litecoin ETF is whether there is enough investor demand to make it a success. James Seyffart, an ETF analyst at Bloomberg Intelligence, believes that even if the demand for Litecoin is relatively low compared to Bitcoin or Ethereum, it could still see positive investor interest.

“Even if demand is comparatively low, it could still see some success,” Seyffart explained. “Just because it won’t have the same explosive growth as Bitcoin or Ethereum ETFs doesn’t mean it won’t be successful.”

While Bitcoin ETFs set historical records in their debut year, with the BlackRock iShares Bitcoin Fund (IBIT) becoming the most successful launch in U.S. ETF history, the future of Litecoin ETFs remains uncertain. JPMorgan’s Kenneth Worthington raised concerns about investor interest in altcoin ETFs, noting that tokens beyond Bitcoin, Ethereum, and Solana often lack depth, which could limit their long-term appeal.

Currently, about 6% of Bitcoin’s market capitalization—roughly $1.97 trillion—is locked in Bitcoin ETFs. In comparison, Ethereum ETFs hold about 3% of Ethereum's market cap of $401 billion. Applying these adoption rates to Litecoin, which has a market capitalization of $9.6 billion, suggests that Canary Capital's Litecoin ETF could attract anywhere between $290 million and $580 million in its first year, depending on how well the market responds to the new fund.

While $290 million may seem modest compared to the $108 billion in assets held by Bitcoin ETFs or the $12 billion in Ethereum ETFs, it would still be a significant amount for a new cryptocurrency ETF. According to Seyffart, of the approximately 4,000 ETFs in the U.S., only about 1,330 have assets under management (AUM) greater than $300 million, making Litecoin ETFs potentially larger than many of the existing funds in the U.S. market.