Potential Litecoin ETF Could Attract Significant Investor Interest

According to CoinDesk, the prospect of a litecoin (LTC) exchange-traded fund (ETF) is gaining attention, with potential investor demand estimated to reach as high as $580 million. This projection is based on the adoption rate seen with bitcoin ETFs, which currently hold about 6% of bitcoin's total supply. If a similar trend occurs with a litecoin ETF, it could result in substantial inflows for the cryptocurrency, which shares a Proof of Work consensus mechanism with bitcoin. The discussion around a litecoin ETF intensified on Thursday as market participants evaluated the possibility of LTC becoming the third cryptocurrency to secure its own ETF in the U.S., following bitcoin and ethereum. Canary Capital, a digital asset-focused investment firm established by former Valkyrie Funds co-founder Steven McClurg, is considered well-positioned to launch such a product. The firm initiated efforts for a litecoin ETF in October, and on Thursday, the Nasdaq stock exchange filed a 19b-4 document with the Securities and Exchange Commission (SEC), setting the stage for a regulatory decision. Industry experts, including Bloomberg's Balchunas, anticipate that the SEC might approve a litecoin ETF, citing industry discussions and the technological similarities between litecoin and bitcoin. However, the success of a litecoin fund hinges on investor demand. James Seyffart, an ETF analyst at Bloomberg Intelligence, noted that even if demand is lower compared to bitcoin or ethereum ETFs, a litecoin ETF could still achieve success based on market and investor interest. The launch of bitcoin ETFs set unprecedented records, with the BlackRock iShares Bitcoin Fund (IBIT) becoming the most successful ETF launch in U.S. history. Despite this, JPM analyst Kenneth B. Worthington expressed uncertainty about investor demand for additional crypto products, suggesting that tokens beyond Bitcoin, Ethereum, or Solana might only capture limited attention. Worthington's analysis indicates that about 6% of bitcoin's market capitalization is held in ETFs, while ethereum ETFs account for approximately 3% of ether's market cap. Applying this adoption rate to litecoin, which has a market cap of $9.6 billion, Canary Capital's fund could attract between $290 million to $580 million in its first year, depending on investor adoption. While $290 million may seem modest compared to the $108 billion gathered by bitcoin ETFs or the $12 billion held by ether ETFs, it surpasses the assets under management of most U.S. ETFs. Seyffart highlighted that only about 1,330 out of roughly 4,000 ETFs in the U.S. have assets exceeding $300 million.