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With spot Ether exchange-traded products (ETPs) set to hit the markets next Tuesday, industry experts predict Ethereum (ETH) could reach a new all-time high soon after.
Matt Hougan, Chief Investment Officer at Bitwise, outlines three key reasons why Ethereum might soar above $5,000 following the ETF launch.
New Sources of Demand
Hougan explains that while ETFs do not change the fundamental nature of the underlying asset, they introduce new sources of demand.
When spot Bitcoin (BTC) ETFs were launched, the demand significantly outpaced the new supply generated by miners, driving Bitcoin’s price up.
He draws a parallel to Ethereum, stating:
“BTC has risen ~25% since the launch of Bitcoin ETPs on January 11, and more than 110% since the market started pricing in a launch in October 2023. Will we see the same sort of impact with ETH? Actually, I think it might be bigger.”
Potential Influx of Investment
Hougan highlights several reasons for his optimistic outlook:
Lower Short-Term Inflation Rate: Ethereum’s slower supply growth compared to Bitcoin.
Non-Compulsory Selling Behavior of ETH Stakers: Unlike miners, ETH stakers are not required to sell their holdings immediately.
Substantial Portion of ETH Being Staked or Locked in Smart Contracts: More than 33 million Ether are staked today, nearly 28% of the entire cryptocurrency’s supply. This Ether is locked up for a set period, meaning it cannot be withdrawn or sold immediately.
Hougan projects that the launch of Ethereum ETFs could attract upwards of $15 billion in new assets within the first 18 months.
Given Ethereum’s current trading price of around $3,400, he believes it is plausible for ETH to challenge its previous all-time high and potentially exceed $5,000.
Ethereum operates on a proof-of-stake consensus algorithm, which means it doesn’t require industrial-grade mining operations to keep the network secure.
Instead, users lock up 32 Ether (worth roughly $111,000 today) to become validators. This structure is expected to pay significant dividends and enable the new ETFs to outperform Bitcoin funds.
Broader Market Optimism
“Spot Ethereum ETFs approvals, a more positive outlook on the economy, and a smattering of crypto-friendly votes on Capitol Hill signal that the world’s two leading cryptocurrencies will enjoy strong tailwinds over the next few weeks,” he said.
Brickell forecasts prices of $80,000 for Bitcoin and $5,000 for Ethereum.
Further, Jacob Joseph, a research analyst at cryptocurrency data firm CCData, also expects Ethereum to hit a new record. He predicts that investors will pour $3.9 billion into US spot Ethereum ETFs within the first 100 days of their launch, extrapolating this sum from the performance of the first 10 spot Bitcoin ETFs.
Despite this, Joseph warns that Ethereum may face challenges because of outflows from the Grayscale Ethereum Trust. The Grayscale Bitcoin Trust has experienced over $17.7 billion in outflows since its January launch, according to BitMEX research.