According to speculations, the upcoming launch of spot Ethereum exchange-traded funds in the US will significantly impact Ethereum price. Matt Hougan, the chief investment officer at Bitwise, believes this impact could be even more profound than Bitcoin ETFs’ effect on BTC.
Also, Hougan noted that some market instability might roughen the ETFs’ early trading days. However, they will eventually impact Ethereum’s price than Bitcoin ETFs.
Ethereum ETFs and The Impact on Price Action
Hougan noted that the $11 billion Grayscale Ethereum Trust (ETHE) could record a substantial outflow once it converts to an exchange-traded product.
The same event happened with spot Bitcoin ETFs when they began trading earlier this year. But despite this potential turbulence, Hougan remains optimistic about Ethereum reaching new price highs by the end of the year.
He highlighted several reasons Ethereum ETFs could substantially influence ETH prices more. The first reason is that Ethereum’s inflation rate is nearly zero due to the limited amount of ETH created daily. This adds to the widespread use of Ethereum-based applications.
The second reason he gave is that those staking ETH will not have to deal with high operational costs like Bitcoin miners. Bitcoin miners faced significant costs, particularly for hardware and energy operations.
Hougan explained that since ETH stakers would not have to deal with high costs, they would not need to sell their holdings. Lastly, about 28% of all ETH is currently staked and locked up for extended periods, effectively reducing the available supply in the market.
Hougan Forecasts Positive Trajectory for ETH Price
Meanwhile, anticipation has heightened as the launch of the spot ETH ETF approaches. Bloomberg ETF analyst Eric Balchunas says the launch could happen on July 23.
Hougan predicts that Ethereum ETFs will drive Ether’s price to over $5,000 by 2024, a significant increase from its current value of $3,452. However, as Hougan suggests, this projection might be conservative if the actual inflows into the ETFs surpass market expectations.
Daan Crypto Trades, a well-known pseudonymous crypto trader, has echoed the same sentiment. Daan believes that the potential ETF inflows have been underestimated.
$ETH Getting really compressed here after the initial move up due to the ETF news.
Sitting on top of the Daily 200MA/EMA. I suspect this will eventually break out surrounding the ETF launch.
My expectation is still a little more optimistic in terms of ETF flows than most. pic.twitter.com/iHwuUBKOhE
— Daan Crypto Trades (@DaanCrypto) July 17, 2024
The crypto trader also noted that Ether currently exceeds its 200-day Moving Average. This position indicates there is a possibility for a potential price breakout following the ETF launch.
While Hougan is bullish, projecting that Ethereum could hit $5,000 or higher by year’s end, some market participants expect short-term declines.
Another pseudonymous trader, Kaleo, anticipates a potential drop in Ethereum’s price compared to Bitcoin after the ETF launch. This suggestion presents a more contradictory view.
$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
Besides these facts, futures traders are bracing for volatility. Information from CoinGlass indicates that a 10% price increase to $3,750 would result in substantial short liquidations, whereas a 10% decrease would heavily impact long positions.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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