Ethereum (ETH) to raise over $5k in upcoming ETF launches and other key issues
TLDR
Matt Hougan, CIO of Bitwise, predicts that Ethereum will reach $5,000 after the ETF launch. Hugan cited Ethereum's low inflation, volatility and locked-in supply as key factors. He expects $15 billion in new assets for the Ethereum ETF in the first 18 months. The first few weeks may be volatile due to the withdrawal from the Greyscale Ethereum Trust. Some traders have different opinions on short-term price action.
Matt Hougan, chief investment officer at Bitwise Asset Management, made a prediction about the future price of Ethereum. He believes the price of ETH could rise above $5,000 following the launch of Ethereum ETFs, possibly reaching a new all-time high by the end of the year.
Haugan's prediction is based on the expected impact of ETF flows on the price of Ethereum, similar to what has been seen with Bitcoin since the launch of ETFs. However, he warns that the first few weeks can be turbulent.
“I think the first few weeks may be choppy as the money will flow from the $11 billion Grayscale Ethereum Trust (ETHE) into ETFs,” Hougan wrote.
Bitwise CIO outlines three key reasons why Ethereum may see more impact from ETF revenues than Bitcoin did. First of all, Ethereum inflation has been effectively zero for the past year, while the supply of ETH has remained constant at 120 million. This contrasts with Bitcoin's 1.7% inflation rate when its ETFs launched.
Second, Hugan points out the difference in stack volatility between Ethereum and Bitcoin. Unlike Bitcoin miners, who often need to sell their mined BTC to cover operating costs, Ethereum stakeholders are not under the same pressure to sell. “There is less forced selling in Ethereum every day than in Bitcoin,” Hugan said.
Finally, a large portion of ETH is currently locked up in decentralized finance (DeFi) contracts. “Right now, 28% of all ETH is in stock, which means it's effectively off the market,” Hugan explained. An additional 13% is locked up in DeFi smart contracts, resulting in 40% of ETH not immediately available for sale.
Hugan expects Ethereum ETFs to attract $15 billion in new assets in the first 18 months. This significant flow could drive ETH to a new high from its current trading price of approximately $3,400, surpassing its previous all-time high.
Some traders, like the fictitious CryptoKaleo, believe that Ethereum could soon fall against Bitcoin following the launch of the ETF. This difference in opinion reflects the uncertainty and potential volatility in the market as it adapts to new ETF products.
$ETH / $BTC
I'm going to be contrarian here and say that I believe that Ethereum will dip a bit against BTC next week.
Lots of hype going into the space ETF launch (which I think is warranted), but don't expect this to show up in a few months. pic.twitter.com/gAHA69BtBy
— KALEO (@CryptoKaleo) July 17, 2024
According to data from CoinGlass, futures traders are currently betting on a drop in the price of Ethereum. A 10% rise to $3,750 would generate $1.31 billion in short-term liquidity, while a 10% dip would wipe out $544.39 million in long positions.
Despite these short-term doubts, Hugan is confident in Ethereum's long-term prospects. He believes that the introduction of ETFs and the resulting demand volatility could challenge and surpass previous records for Ethereum.
According to Bloomberg ETAT analyst Eric Balchunas, the launch of Ethereum ETFs is expected to be on July 23.
This event is expected to be a milestone for the cryptocurrency market, which could open up Ethereum investment to more institutional and retail investors.
