Ethereum, the second-largest cryptocurrency by market capitalization, could face a significant price drop of up to 30% following the launch of spot Ether exchange-traded funds (ETFs), according to Andrew Kang, co-founder and partner at crypto-focused venture capital firm Mechanism Capital.
Kang's analysis suggests that the impact of Ethereum ETFs on the asset's price is less clear-cut compared to the launch of Bitcoin ETFs earlier this year. He estimates that spot Ether ETFs will attract only 15% of the flows that spot Bitcoin ETFs have seen, based on estimates from Bloomberg ETF analysts.
In the first six months, spot Bitcoin ETFs saw about $5 billion in new funds, excluding rotations from the Grayscale Bitcoin Trust (GBTC) and other derivative trading activities. Extrapolating this data to Ethereum, Kang predicts around $840 million in "true" inflows for spot Ether ETFs during the same period.
Kang argues that Ethereum attracts less institutional interest compared to Bitcoin, and there are limited incentives for investors to convert spot Ether into ETF form. Additionally, Ethereum's network cash flows have been lackluster, with the asset trading at a high price-to-sales ratio and negative earnings after inflation.
"How much upside would an ETH ETF provide? I would argue not much," Kang stated, predicting that Ether's price could range between $2,400 and $3,000 after the ETF launch, down from its current level of around $3,410.
Kang's bearish outlook is not shared by everyone in the industry. Industry analyst Patrick Scott expects a similar directional movement to how the spot Bitcoin ETFs have performed, although he does not foresee Ether's price doubling. Meanwhile, asset management firm VanEck is more optimistic, projecting that spot Ether ETFs could help drive Ether's price to $22,000 by 2030.
In addition to the potential impact of Ethereum ETFs, Bitcoin derivatives are also turning bearish as traders anticipate a sub-$60,000 BTC price. Bitcoin's price has already dropped below $60,000 for the first time since May, with the overall crypto market shedding over $70 billion overnight.
The broader macroeconomic environment, including expectations of potential interest rate hikes by the Federal Reserve, has contributed to the risk-off sentiment in the market. Technical analysis also points to further downside potential for Bitcoin, with the cryptocurrency breaching crucial support levels.
While some analysts remain cautiously optimistic about Ethereum's long-term prospects, the market remains vulnerable to various macroeconomic and regulatory factors. Investors and traders will need to closely monitor the situation and be prepared for continued volatility in the coming weeks and months.
Top comments (0)