Bitwise Chief Investment Officer Matt Hougan predicts that U.S. spot Ether exchange-traded funds (ETFs) could substantially impact Ethereum’s price, potentially more than Bitcoin ETFs did for BTC.
Early Volatility and Long-Term Gains
Hougan anticipates a turbulent start for Ether ETFs, as initial investments might shift away from the $11 billion Grayscale Ethereum Trust (ETHE) upon its conversion to an exchange-traded product (ETP). Despite this, Hougan remains optimistic, stating, “By year-end, I’m confident the new highs will be in.” He advises against expecting immediate significant results, pointing to the selling pressure faced by Bitcoin ETFs when they launched on January 11.
Three Factors Driving ETH Price Growth
Hougan identifies three key factors that will drive Ethereum’s price higher with the advent of Ether ETFs:
- Minimal Inflation Rate: Ethereum’s inflation rate is practically zero, thanks to the extensive use of Ethereum-based applications and the relatively small amount of ETH created daily.
- Lower Operational Costs: Unlike Bitcoin miners, who must sell Bitcoin to cover the high costs of mining, those staking ETH face minimal direct expenses.
- Staked ETH: Around 28% of all ETH is currently staked and locked away, effectively reducing the available market supply.
Anticipation for Spot Ether ETFs
The market eagerly anticipates the launch of the spot Ether ETF, expected on July 23, according to Bloomberg ETF analyst Eric Balchunas. Hougan predicts this product will push Ether’s price above $5,000 by the end of 2024, a 47% increase from its current price of $3,401. However, Hougan suggests this estimate might be conservative if the inflows into Ether ETFs surpass market expectations.
“If flows are stronger than many market commentators expect, the price could be much higher still,” he asserted, echoing the sentiments of pseudonymous crypto trader Daan Crypto Trades, who also believes the potential inflows have been underestimated. Daan Crypto Trades noted on July 17 that Ether’s price is “sitting on top” of the 200-day Moving Average (MA) and “will eventually break out surrounding the ETF launch.”
Also Read: Bitwise Advances Ethereum ETF Plans with Amended SEC Filing
Diverging Predictions
While Hougan and Daan Crypto Trades are optimistic, not all analysts share their views. Pseudonymous crypto trader Kaleo predicts a short-term decline in Ether’s price upon the ETF launch, suggesting that Ethereum might dip against BTC next week.
Despite these differing opinions, futures traders are actively betting on Ethereum’s near-term price movements. A 10% increase to $3,750 would result in $1.31 billion in short liquidations, while a 10% decrease could erase $544.39 in long positions, according to CoinGlass data.
