CIO: Ethereum ETFs to Outshine Bitcoin ETFs
18 Jul, 2024 ● Crypto people
United States spot Ethereum exchange-traded funds are expected to have a rough start but could significantly impact the asset’s price, even more so than Bitcoin ETFs did for BTC, according to Bitwise Chief Investment Officer Matt Hougan.
“The first few weeks could be choppy, as money may flow out of the $11 billion Grayscale Ethereum Trust (ETHE) after it converts to an ETP,” Hougan stated.
“By year-end, I’m confident the new highs will be in,” he added, cautioning against expecting significant results “immediately” due to potential selling pressure similar to what spot Bitcoin ETFs experienced when trading launched on Jan. 11.
Hougan provided three main reasons for believing Ether ETFs will have a bigger impact on the asset's price: Ether’s inflation rate is effectively zero, given the widespread usage of Ethereum-based applications compared to the “small amount of ETH” created daily.
Additionally, Bitcoin miners must sell Bitcoin to maintain operations due to the high costs of mining, including expensive computer chips and energy.
In contrast, those staking ETH do not have “significant direct costs.”
Another factor is that approximately one-third of all ETH (28%) is staked and locked away for a period of time.
“Currently, 28% of all ETH is staked, meaning it is effectively off the market,” he said.
Hougan’s comments come as anticipation grows for the launch of the spot Ether ETF, expected to debut on July 23, according to Bloomberg ETF analyst Eric Balchunas.
Hougan predicts the product will push Ether’s price above $5,000 by the end of 2024, a 47% increase from its current price of $3,401, as per CoinMarketCap data.
However, this prediction might be conservative if inflows exceed market expectations, according to Hougan.
“If flows are stronger than many market commentators expect, the price could be much higher still,” he declared, echoing the prediction of pseudonymous crypto trader Daan Crypto Trades, who also believes the potential inflows into Ether ETFs have been underestimated.
“My expectation is still a little more optimistic in terms of ETF flows than most,” Daan Crypto Trade wrote in a July 17 X post.
They also noted that Ether’s price is “sitting on top” of the 200-day Moving Average (MA) and “will eventually break out surrounding the ETF launch.”
Meanwhile, pseudonymous crypto trader Kaleo holds an opposite view, predicting that the price will drop upon the Ether ETF launch.
“Gonna be a contrarian here and say that I believe Ethereum actually dips a bit next week vs. BTC,” they added.
While Hougan is optimistic about Ethereum reaching $5,000 and beyond by the year’s end, futures traders are betting on a near-term decline in Ethereum’s price.
A 10% increase to $3,750 will result in $1.31 billion in short liquidations, whereas a 10% dip to the downside will erase $544.39 million in long positions, according to CoinGlass data.
Sources:
https://coinmarketcap.com/currencies/ethereum/
https://x.com/DaanCrypto/status/1813635024668823698
