Bitwise CIO Matt Hougan says spot Ethereum ETF inflows could have a bigger impact on ETH than on BTC. In this context, Hougan gives a price target beyond the all-time high.
Bitwise CIO: Spot Ethereum ETF would push ETH above $5K!
Matt Hougan, Chief Investment Officer at crypto asset manager Bitwise, says that spot Ethereum ETF inflows could have a bigger impact on ETH after launch than equivalent products have done for BTC. Hougan predicts that spot Ethereum ETF inflows will push the ETH price above the ATH level of $5,000, although not immediately.
Hougan expects the first few weeks after Ethereum ETFs go live to be “choppy” for ETH due to the potential influx of funds from the $11 billion Grayscale Ethereum Trust (ETHE) once it is converted into a spot ETF. “But I am confident that new highs will be reached by the end of the year. And if the flows are stronger than many market commentators expect, the price could still be much higher,” he says.
As you follow from Kriptokoin.com, the US SEC approved eight Forms 19b-4 for Bitwise’s spot Ethereum ETFs on May 23, along with BlackRock, Fidelity, VanEck, Ark Invest, Invesco, Franklin Templeton and Grayscale. However, the issuers’ S-1 registration statements must become effective on July 23 before trading can begin, sources said Monday.
Impact of ETF flows on ETH compared to Bitcoin
Matt Hougan says that while spot ETFs don’t change the fundamentals of an underlying asset like ETH, they do bring new sources of demand. According to Hougan, since the launch of spot Bitcoin ETFs, including Bitwise’s BITB, a total of 263,965 BTC has been purchased by funds, compared to 129,281 BTC generated by Bitcoin miners. That’s more than double. Hougan says Bitcoin is up nearly 40% since ETFs were launched on January 11 and more than 100% since the market started pricing their approval in October 2023, and he expects the impact on ETH to be larger.
3 reasons for the strong price impact of Ethereum ETFs!
The Bitwise CIO previously predicted that spot Ethereum ETFs would attract $18 billion in net inflows in their first 15 months. This is a slower pace than Bitcoin ETFs, which reached this net inflow milestone after just five months of trading. However, Hougan expects the money flowing into Ethereum ETFs to have a bigger impact on the price for three related reasons. Ethereum’s short-term inflation rate has effectively been 0% over the past year, compared to 1.7% for Bitcoin when spot Bitcoin ETFs were launched, according to Hougan. “That meant we needed $16 billion of Bitcoin purchases a year just to tread water,” Hougan says.
Hougan says that Bitcoin miners often need to sell the new BTC they produce to cover extensive operational costs, while Ethereum miners do not, with much lower direct costs to secure the proof-of-stake protocol. “Even if Ethereum’s inflation rate goes above 0%, I don’t expect significant selling pressure from stakers – there is less forced selling every day on Ethereum than on Bitcoin,” he said.
Finally, Hougan says that ETH is effectively “off-market” as stakers lock in assets to earn rewards. According to the latest data, the amount of ETH staked as a proportion of supply is currently 27.5%. Hougan argues that with the other 13% locked in DeFi smart contracts, about 40% of ETH is “partially or completely unsellable.” If the Spot Ethereum ETF products are successful, seeing the entry level predicted by the Bitwise CIO, given these dynamics, it is not difficult for ETH to break its old record.
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