Ethereum ETFs Poised To Surpass Bitcoin's Impact?

As the highly anticipated launch date of spot Ethereum ETFs approaches, Matt Hougan, Chief Investment Officer of crypto asset manager Bitwise, has stressed the potential

With the highly anticipated launch of spot Ethereum ETFs on the horizon, Matt Hougan, Chief Investment Officer of crypto asset manager Bitwise, has highlighted the potential for these ETF inflows to propel the Ethereum price to record highs. 

In a recent client note, Hougan pointed out the significant impact that ETF flows could have on the Ethereum price, possibly surpassing even the effects witnessed in the spot Bitcoin ETF market in the US. 

Ethereum ETFs: Poised To Surpass Bitcoin’s Impact?

Hougan expresses confidence that the introduction of spot Ethereum ETFs will lead to a surge in ETH's value, potentially reaching all-time highs above $5,000. However, he cautions that the first few weeks after the ETF launch could be volatile, as funds may flow out of the existing $11 billion Grayscale Ethereum Trust (ETHE) following its conversion to an ETF.

This could be similar to the case of the Grayscale Bitcoin Trust (GBTC), which saw substantial outflows of over $17 billion after the Bitcoin ETF market was approved in January, with the first inflows being recorded five months later on May 3.

Nevertheless, Hougan anticipates the market to stabilize in the long term, pushing Ethereum to record prices by the end of the year after the initial outflows subside, using a comparison with Bitcoin in key metrics to substantiate this thesis.

'Most Bullish Setup Ever': Crypto Analyst Lists 10 Reasons To Invest Now

For instance, Bitcoin ETFs have purchased more than double the amount of Bitcoin compared to what miners have produced over the same period, contributing to a 25% increase in Bitcoin's price since the ETF launch and a 110% increase since the market began pricing in the launch in October 2023.

That said, Hougan believes the impact on Ethereum could be even more significant, and he identifies three structural reasons why Ethereum's ETF inflows could have a greater impact than Bitcoin's.

Lower Inflation, Staking Advantage, And Scarcity

The first reason that Bitwise's CIO highlights is Ethereum's lower short-term inflation rate. While Bitcoin's inflation rate was 1.7% when Bitcoin ETFs launched, Ethereum's inflation rate over the past year has been 0%.

The second reason lies in the difference between Bitcoin miners and Ethereum stakers. Due to the expenses associated with mining, Bitcoin miners generally sell a large portion of the Bitcoin they acquire to cover operational costs.

In contrast, Ethereum relies on a proof-of-stake (PoS) system, where users stake ETH as collateral to process transactions accurately. ETH stakers, not burdened with high direct costs, are not compelled to sell the ETH they earn. Consequently, Hougan suggests that Ethereum's daily forced selling pressure is lower than that of Bitcoin.

XRP Whales Are On The Move Again – Here's What They're Doing This Time

The third reason stems from the fact that a substantial portion of ETH is staked and, therefore, unavailable for sale. Currently, 28% of all ETH is staked, while 13% is locked in smart contracts, effectively removing it from the market.

This results in approximately 40% of all ETH being unavailable for immediate sale, creating a considerable scarcity and ultimately favoring a potential increase in price for the second largest cryptocurrency on the market, depending on the outflows and inflows recorded. Hougan concludes:

As I mentioned above, I expect the new Ethereum ETPs to be a success, gathering $15 billion in new assets over their first 18 months on the market… If the ETPs are as successful as I expect—and given the dynamics above—it’s hard to imagine ETH not challenging its old record.

ETH was trading at $3,460, up 1.5% in the past 24 hours and nearly 12% in the past seven days.

Featured image from DALL-E, chart from TradingView.com

The above is the detailed content of Ethereum ETFs Poised To Surpass Bitcoin's Impact?. For more information, please follow other related articles on the PHP Chinese website!