Ethereum (ETH) to Rally Over $5k With Upcoming ETF Launches & Other Key Factors

TLDR

• Matt Hougan, CIO of Bitwise, predicts Ethereum will reach $5,000 after ETF launches.
• Hougan cites Ethereum’s low inflation rate, staking dynamics, and locked supply as key factors.
• He expects $15 billion in new assets for Ethereum ETFs in the first 18 months.
• Initial weeks may be volatile due to outflows from Grayscale Ethereum Trust.
• Some traders have differing opinions on short-term price movements.

Matt Hougan, Chief Investment Officer at Bitwise Asset Management, has made a prediction about Ethereum’s future price. He believes that following the launch of Ethereum ETFs, the price of ETH could surge past $5,000, potentially reaching new all-time highs by the end of the year.

Hougan’s forecast is based on the expected impact of ETF inflows on Ethereum’s price, similar to what was observed with Bitcoin after its ETF launches. However, he cautions that the initial weeks might be turbulent.

“I think 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 ETF, Hougan wrote.

The Bitwise CIO outlines three key reasons why Ethereum might see an even greater impact from ETF inflows than Bitcoin did. First, Ethereum’s inflation rate has been effectively zero over the past year, with the supply of ETH remaining constant at 120 million. This contrasts with Bitcoin’s 1.7% inflation rate when its ETFs launched.

Secondly, Hougan points to the differences in staker dynamics between Ethereum and Bitcoin. Unlike Bitcoin miners who often need to sell their mined BTC to cover operational costs, Ethereum stakers are not under the same pressure to sell. “There is simply less forced selling each day in Ethereum than in Bitcoin,” Hougan noted.

Lastly, a substantial portion of ETH is currently staked or locked in decentralized finance (DeFi) contracts. “Currently, 28% of all ETH is staked, meaning it is effectively off the market,” Hougan explained. An additional 13% is locked in DeFi smart contracts, resulting in about 40% of ETH being unavailable for immediate sale.

Hougan expects Ethereum ETFs to attract $15 billion in new assets over the first 18 months. This significant influx could drive ETH from its current trading price of approximately $3,400 to new heights, potentially surpassing its previous all-time high.

Some traders, like the pseudonymous CryptoKaleo, believe that Ethereum might actually dip against Bitcoin in the short term following the ETF launch. This divergence in opinions highlights the uncertainty and potential volatility in the market as it adapts to the new ETF products.

$ETH / $BTC

Gonna be a contrarian here and say that I believe Ethereum actually dips a bit next week vs. BTC.

Lots of hype leading into the spot ETF launch (which I think is warranted), but don’t think this manifests into outperformance until a couple months later. pic.twitter.com/gAHA69BtBy

— K A L E O (@CryptoKaleo) July 17, 2024

Data from CoinGlass shows that futures traders are currently betting on a near-term decline in Ethereum’s price. A 10% increase to $3,750 would result in $1.31 billion in short liquidations, while a 10% dip would erase $544.39 million in long positions.

Despite these short-term uncertainties, Hougan remains confident in Ethereum’s long-term prospects. He believes that the introduction of ETFs and the resulting demand dynamics make it likely that Ethereum will challenge and surpass its previous records.

The launch of Ethereum ETFs is expected to occur on July 23, according to Bloomberg ETF analyst Eric Balchunas.

This event is anticipated to be a significant milestone for the cryptocurrency market, potentially opening up Ethereum investment to a broader range of institutional and retail investors.

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