Ethereum may fall by 30% after the launch of ETH ETFs – Crypto VC
Ether spot could drop to $2,400 after the launch of Ether exchange-traded funds (ETFs), according to Andrew Kang, founder and partner at crypto-focused venture capital firm Mechanism Capital.
According to CoinGecko, Ether (ETH) is trading at $3,410 at the time of writing. A drop to $2,400 would be nearly 30% off the current price.
In a June 23 X post, Kang noted that unlike Bitcoin, Ether attracts less institutional interest, there are few incentives to convert Ether into ETF form, and the network's cash flows have not been impressive.
“How much leverage does the ETH ETF provide? I don't argue much,” Kang continued.
“My expectation is $2,400 to $3,000 after the EFF starts.”
As Bitcoin (BTC) hit a new all-time high, Ether topped $4,000 in March, and the forecast price could be a major backtrack for the asset. It reached a similar level just days before the United States Securities and Exchange Commission (SEC) approved Ether ETF.
Compared to Bitcoin ETFs, flows will be small
Kang sees Ether ETFs attracting 15% of the flows seen by Bitcoin ETFs, which is in the 10-20% range estimated by Bloomberg ETF analysts Eric Balchunas and James Seifert.
Kang noted that just $5 billion in new funds — not including funds converted from spot form — flowed into spot Bitcoin ETFs in the first six months.
Extrapolating this data to Ethereum suggests that Ether ETFs could take in $840 million in “real” earnings over the same timeframe.
“I believe that the expectations of crypto natives are overblown and disconnected from the real tradfi allocation choices,” Kang said.
“This indicates that the ETF is overpriced.”
Not everyone agrees with Kang's price prediction. Industry analyst Patrick Scott (aka Dynamo Diffie) recently told Cointelegraph magazine that he “expects a similar directional movement” to how the Bitcoin ETFs position has performed. However, it does not see the price of Ether doubling.
Meanwhile, asset management firm VanEek believes the Spot Ether ETF will help push Ether to $22,000 by 2030.
Overpriced technology stock
Ethereum may carry some weight to investors as a decentralized financial settlement, a world computer or a Web3 app store, but when you look at the data, Kang argued, it's a “hard sell.”
With payments driven by decentralized finance and the ultimate invincible token cycle, Ethereum's future as a cash flow “machine” looks even more promising. However, that didn't last, and now Ethereum may look like just another booming tech stock.
“With $1.5B 30d annual revenue, 300x PS ratio, negative earnings/PE ratio after inflation, how do analysts justify this value to their father's family office or macro fund boss?”
No hard selling.
Kang said the unexpected approval means the issuers have time to build trading platforms for institutional investors. However, Bitwise and VanEck are among the few reputable Ethereum ETF indicators that have previously released Ethereum-focused announcements.
Kang added that delisting Ether ETF shares from the proposed position could discourage investors from converting their Ether positions into ETFs.
RELATED: Asset managers update Ether ETF proposals ahead of July launch
Kang acknowledged that BlackRock and other financial institutions have started to make moves on Ethereum in the real-world asset token space, but he is unsure how much of an impact it will have on Ether's price.
The Mechanism Capital executive thinks that the ETH/BTC price ratio could drop from 0.054 at current prices to 0.035 in the next 12 months.
However, Kang thinks that Bitcoin's rally to $100,000 in the next six to nine months could “pull” Ether to new highs in the process.
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