Ethereum could fall 30% after spot ETH ETFs launch — Crypto VC

    24 Jun 2024

    Ether could tumble to as low as $2,400 after the launch of spot Ether exchange-traded funds, says Andrew Kang, a founder and partner at crypto-focused venture capital firm Mechanism Capital.

    According to CoinGecko, Ether is currently trading at $3,410. A tumble to $2,400 would be a nearly 30% drop from its current price.

    In a June 23 X post, Kang said, unlike Bitcoin, Ether attracts less institutional interest, there are few incentives to convert spot Ether into ETF form, and the network cash flows haven’t been very impressive.

    “How much upside would an ETH ETF Provide? I would argue not much,” said Kang, adding:

    “After the ETF launch my expectation is $2,400 to $3,000.”

    The forecast price could be a significant backtrack for the asset, given Ether already reached over $4,000 in March when Bitcoin tipped a new all-time high. It almost reached the same level again days before the U.S. Securities and Exchange Commission (SEC) approved Ether ETFs.

    Flows relative to spot Bitcoin ETFs will be small

    Kang sees spot Ether ETFs attracting 15% of the flows that spot Bitcoin ETFs have seen — which is in the 10-20% range estimated by Bloomberg ETF analysts Eric Balchunas and James Seyffart.

    Kang noted that only $5 billion in new funds, excluding funds converted from spot form, flowed into the spot Bitcoin ETFs in the first six months.

    Extrapolating this data to Ethereum suggests the spot Ether ETFs take in $840 million in “true” inflows over the same timeframe.

    “I believe that the expectations of crypto natives are overinflated and disconnected from the true preferences of tradfi allocators,” Kang said.

    “This implies that the ETF is more than priced in.”

    Not everyone agrees with Kang’s price prediction. Industry analyst Patrick Scott (widely known as Dynamo DeFi) recently told Cointelegraph Magazine that he “expects a similar directional movement” to how the spot Bitcoin ETFs have performed. However, he doesn’t see Ether’s price doubling.

    Meanwhile, asset management firm Van Eck believes spot Ether ETFs can help drive Ether to $22,000 by 2030.

    Overpriced tech stock

    Ethereum’s pitch to investors as a decentralized financial settlement layer, a world computer or Web3 app store could carry some weight, but it’s a “hard sell” when you look at the data, Kang argued.

    Ethereum’s future as a cash flow “machine” looked more promising when fees were driven up by decentralized finance and the last non-fungible (NFT) cycle. However, that hasn’t continued, and now Ethereum may look like another overpriced tech stock, he said:

    “At $1.5B 30d annualized revenue, a 300x PS ratio, negative earnings/PE ratio after inflation, how will analysts justify this price to their daddy’s family office or their macro fund boss?”

    No staking a hard sell

    Kang said the surprise approval also means the issuers have less time to make marketing pitches toward institutional investors, though Bitwise and VanEck are among the few approved Ethereum ETF applicants that have released Ethereum-themed ads already.

    The removal of staking from the proposed spot Ether ETFs may also deter investors from converting their spot Ether into ETF form, Kang added.

    Kang acknowledged that BlackRock and other financial institutions have started making moves in the real-world asset tokenization space on Ethereum, however, he isn’t sure how much impact that will have on Ether’s price.

    The Mechanism Capital executive thinks ETH/BTC price ratio could slide from 0.054 at current prices to as low as 0.035 over the next 12 months.

    However, Kang thinks a Bitcoin price rally to $100,000 over the next six to nine months could “drag” Ether to a new all-time high in the process.


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