Ethereum ETFs Expected to Push ETH Beyond $5,000
By: Eva Baxter
Bitwise Chief Investment Officer Matt Hougan has made a bold prediction regarding the future value of Ethereum (ETH), forecasting that the launch of spot Ethereum ETFs could drive the digital asset’s price to over $5,000. In a recent investor note, Hougan expressed his confidence in Ethereum reaching new all-time highs, potentially surpassing the $5,000 mark by year-end.
Hougan outlined several structural reasons behind this optimistic outlook. Firstly, Ethereum’s unique position in terms of its inflation rate, which currently stands at 0%, sets it apart from Bitcoin, which had a 1.7% inflation rate when its ETFs began trading. The zero inflation rate implies that Ethereum does not require massive buying to maintain its value, as Bitcoin did. Moreover, the consumption of Ethereum for various applications, such as stablecoins and tokenized funds, adds an extra layer of organic demand.
The upcoming launch of Ethereum ETFs is expected to generate substantial new demand for the cryptocurrency, much like what was observed with Bitcoin ETFs. Since the approval of Bitcoin ETFs, Bitcoin's price saw a rise of around 25% since January 11 and approximately 110% since October 2023. This precedent sets a positive tone for Ethereum, especially considering Hougan’s projections that ETF assets under management could reach $15 billion within the first 18 months of trading.
Furthermore, Ethereum’s network benefits from the fact that it does not have to deal with significant selling pressure from miners. Instead, Ethereum has stakers who lock up their coins to help the network, which means they do not need to sell their ETH for profits. This staking mechanism supports a continued scarcity of available ETH, as approximately 40% of Ethereum's supply is currently locked in staking and smart contracts.
Hougan also addressed potential challenges, such as outflows from Grayscale Ethereum Trust (ETHE) once it converts to an ETF. He suggested that while there might be some initial price fluctuations, the overall trend would be upward as new demand from spot ETFs outweighs the initial outflows.
Additionally, Hougan emphasized the role of Ethereum’s network activity and the correlation between the amount of ETH being consumed and the thriving ecosystem of Ethereum-based applications. This relationship is seen as a lever of organic demand that would work in favor of ETF investors.
While the current inflation rate of Ethereum is noted to be slightly above zero, the continuous burning of ETH through transaction fees, especially post-Merge, has led to a deflationary trend over the long term. Hougan remains optimistic that the anticipated wave of new investments into Ethereum ETFs will challenge and potentially break previous price records.
