United States spot Ether exchange-traded funds will have a rough start but could have a bigger impact on the asset’s price than Bitcoin ETFs did for BTC, according to Bitwise Chief Investment Officer Matt Hougan.
“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 ETP,” Hougan stated.
“By year-end, I’m confident the new highs will be in,” he added, reiterating not to expect significant results “immediately” given the potential selling pressure similar to what spot Bitcoin (BTC) ETFs faced upon trading launch on Jan. 11.
Three reasons ETH ETFs will have a bigger impact
Hougan gave three main reasons why he believes Ether ETFs will have a bigger impact on the asset's price: Ether’s inflation rate effectively amounts to zero, given the widespread usage of Ethereum-based applications compared to the “small amount of ETH” created daily.
Also, Bitcoin miners are forced to sell Bitcoin to maintain operations due to it being “expensive, requiring high-end computer chips and loads of energy,”. In contrast, those staking ETH do not have “significant direct costs.”
Another reason is that approximately one-third of all ETH (28%) is staked and locked away for a period of time. “Currently, 28% of all ETH is staked, meaning it is effectively off the market,” he said.
Hougan’s comments come amid growing anticipation for the launch of the spot Ether (ETH) ETF, which is expected to debut on July 23, according to Bloomberg ETF analyst Eric Balchunas.
Ether could reach $5,000 by year's end
Hougan predicts that the product will push Ether’s price above $5,000 by the end of 2024, a 47% increase from its current price of $3,401, as per CoinMarketCap data.
However, the prediction might be conservative if inflows exceed market expectations, according to Hougan.
“If flows are stronger than many market commentators expect, the price could be much higher still,” he declared, mirroring the prediction of pseudonymous crypto trader Daan Crypto Trades, who also believes that the amount of potential inflows into Ether ETFs has been underestimated.
“My expectation is still a little more optimistic in terms of ETF flows than most,” Daan Crypto Trade wrote in a July 17 X post.
They further pointed out that Ether’s price is “sitting on top” of the 200-day Moving Average (MA) and “will eventually break out surrounding the ETF launch.”
Meanwhile, pseudonymous crypto trader Kaleo is of the opposite opinion to Daan Crypto Trades — believing that the price will spiral downward upon Ether ETF launch.
“Gonna be a contrarian here and say that I believe Ethereum actually dips a bit next week vs. BTC,” they added.
While Hougan is optimistic about Ethereum reaching $5,000 and beyond by the year’s end, futures traders are betting on a near-term decline in Ethereum’s price.
A 10% increase to $3,750 will wipe $1.31 billion in short liquidations, whereas 10% dip on the downside will erase $544.39 in long positions, according to CoinGlass data.