The launch of spot Ether ETFs in the US is expected to face volatility initially, but could ultimately have a more significant impact on the price of Ether (ETH) compared to what Bitcoin ETFs had on Bitcoin (BTC), according to Matt Hougan, Chief Investment Officer at Bitwise.
Choppy Start, High Hopes
Hougan anticipates some initial volatility, with potential outflows of the $11 billion from the Grayscale Ethereum Trust (ETHE) as it converts to an ETF. However, he remains confident that Ether will reach new highs by year-end, exceeding expectations. This bullish outlook comes with a caution – similar to the selling pressure observed with Bitcoin ETF launches on Jan 11, immediate gains might not be forthcoming.
Three Reasons for Ether’s Potential Surge
Hougan believes several factors will contribute to a more substantial price increase for Ether compared to Bitcoin:
- Lower Inflation: Widespread usage of Ethereum-based applications keeps the daily issuance of new ETH relatively low, effectively negating inflation. Bitcoin, on the other hand, has a higher ongoing inflation rate.
- Reduced Selling Pressure: Staking ETH doesn’t involve the high operational costs associated with Bitcoin mining. This translates to less pressure from participants to sell their holdings to cover expenses.
- Scarcity: A significant portion (roughly 28%) of all ETH is currently staked, effectively taking it out of circulation and tightening supply.
Launch Date and Price Predictions
The much-anticipated spot Ether ETF is expected to debut on July 23rd. Hougan predicts this will push Ether’s price above $5,000 by the end of 2024, reflecting a nearly 50% increase from its current price of $3,401. He acknowledges that this might even be a conservative estimate if inflows exceed market expectations.
In terms of ETF flows, I maintain a slightly more optimistic expectation than most, wrote Daan Crypto Trade in a July 17 X post.
Mixed Opinions from Crypto Community
While Hougan and pseudonymous crypto trader Daan Crypto Trades share an optimistic outlook for Ether, others believe the price might take a temporary dip due to the launch. Meanwhile, futures market data suggests a potential near-term decline for Ether.
According to CoinGlass data, a 10% rise to $3,750 would trigger the liquidation of shorts, totaling $1.31 billion. Conversely, a 10% decline would wipe out $544.39 million in long positions.
Will Ether reach $5,000 and beyond? Only time will tell. But one thing’s for sure, the launch of Ether ETFs is set to be a major event for the cryptocurrency market.
What impact will Ethereum ETFs have on ETH price?
Analysts predict a significant positive impact. The main argument is that ETFs will bring new investors to the table, increasing demand for ETH. Some, like Matt Hougan, CIO at Bitwise, believe this could push prices above $5,000 by year-end 2024.
Why might Ethereum ETFs have a bigger impact than Bitcoin ETFs?
Several factors contribute to this theory:
- Staked Ether: A large portion of ETH is staked, meaning it’s locked up and unavailable for sale, reducing circulating supply and potentially amplifying price increases.
- Lower Ongoing Costs: Unlike Bitcoin miners who must sell BTC to cover operational expenses, ETH stakers have minimal ongoing costs, potentially leading to less sell pressure.
When are these ETFs expected to launch?
The launch of spot Ethereum ETFs in the US is expected imminently, possibly within the next week (as of July, 2024).
Overall, the launch of spot Ethereum ETFs is a significant event for the cryptocurrency market. With its unique characteristics and anticipated investor interest, ETH appears set for a major price surge in the coming months.
