Bitwise founder Matt Hougan: Ethereum spot ETF will push ETH up by more than $5,000

This site (120bTC.coM): Matt Hougan, founder of ETF issuer Bitwise, said that the launch of the Ethereum spot ETF will drive the price of Ethereum to rise and break through historical highs, with a chance of exceeding US$5,000 by the end of the year.

Observed from the supply and demand side

Hougan believes that the best way to simulate the potential impact of the launch of ETP (ETP is an exchange-traded product, and ETF is one of the fund categories) on commodity prices is to consider the relationship between supply and demand. ETPs do not change the fundamentals of underlying commodities such as ETH, but they do bring new sources of demand.

Consider the price changes of Bitcoin following the launch of the Bitcoin Spot ETF in January. Since that day, the Bitcoin ETF has purchased more than double the amount of Bitcoin that miners have been able to produce:

• BTC purchased by ETF: 263,965 BTC

• BTC produced by miners: 129,181 BTC

Since the launch of the Bitcoin Spot ETF on January 11, BTC has risen by approximately 25% and has risen by more than 110% since the market began pricing in October 2023.

Previously Hougan speculated that the Ethereum spot ETF would attract US$15 billion in capital inflows within 18 months of listing. Inflows into Ethereum ETPs will have a greater impact on Ethereum for three structural reasons.

ETH lower short-term inflation rate

When the Bitcoin ETP was launched, the Bitcoin network had an inflation rate of 1.7%. In comparison, Ethereum’s inflation rate over the past year was exactly 0%. This is because, while a small amount of ETH is produced every day, ETH is also consumed based on the use of Ethereum, and over the past year, these two forces have reached a balance.

Unlike BTC miners, ETH stakers do not need to sell

Second key difference: Bitcoin miners typically have to sell the BTC they receive, while ETH stakers do not.

Ethereum does not rely on mining, but uses Proof of Stake (PoS). In the PoS system, users use ETH as collateral to ensure that they process transactions accurately and authentically. In return for correctly processing the transaction, stakers will be rewarded with new ETH. There are no significant direct costs to staking, so there is no need to be forced to sell to balance its operating costs.

28% of ETH is staked and therefore out of the market

Staking has another impact: when you stake ETH, you are locking the ETH in the contract for a period of time. During this period, ETH cannot be withdrawn and sold. Currently, 28% of ETH is staked, meaning it is effectively off the market.

On top of this, another 13% of ETH is locked in decentralized finance smart contracts – for example, as collateral in the loan market. This removes more ETH from the market.

Add it all together and roughly 40% of ETH is unsaleable to some extent.

ETH has the opportunity to challenge US$5,000 by the end of the year

Based on the above inference, Bitwise expects that the new Ethereum spot ETF will drive the trend of ETH after it is listed. Although the first few weeks may be rocky as funds may flow out of the $11 billion Grayscale Ethereum Trust (ETHE) after it converts to an ETF. But by the end of the year, new highs will occur and ETH will have a chance to surpass $5,000.

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