The launch of spot Ethereum ETFs has been highly anticipated by investors, with Chief Investment Officer of Bitwise, Matt Hougan, predicting that these inflows could drive the Ethereum price to new record highs. In his recent client note, Hougan emphasized the significant impact that ETF flows could have on the price of Ethereum, surpassing even the effects seen in the Bitcoin ETF market in the US.
Hougan confidently predicts that the introduction of spot Ethereum ETFs could lead to a surge in the value of ETH, possibly surpassing all-time highs above $5,000. However, he also warns that the initial weeks after the ETF launch could be volatile, with funds potentially moving out of the existing $11 billion Grayscale Ethereum Trust (ETHE) once it transitions to an ETF.
Drawing parallels with the Bitcoin ETF market, Hougan points out that the Grayscale Bitcoin Trust (GBTC) saw significant outflows of over $17 billion after the Bitcoin ETF market approval, with the first inflows recorded 5 months later. Despite this initial volatility, he expects the Ethereum market to stabilize in the long term, leading to record prices by the end of the year.
Hougan identifies three key structural reasons why he believes Ethereum’s ETF inflows could have a greater impact than Bitcoin’s. Firstly, he highlights Ethereum’s lower short-term inflation rate compared to Bitcoin. While Bitcoin had a 1.7% inflation rate at the time of ETF launch, Ethereum’s inflation rate over the past year has been 0%.
Another significant difference lies in the nature of Bitcoin miners and Ethereum stakers. Bitcoin miners often sell acquired Bitcoin to cover operational costs, whereas Ethereum stakers, operating on a proof-of-stake system, are not compelled to sell the ETH they earn. This reduced selling pressure could benefit Ethereum’s price stability and growth potential.
Moreover, a substantial portion of ETH is currently staked or locked in smart contracts, making it unavailable for immediate sale. Approximately 40% of all ETH is unavailable for sale, creating scarcity in the market and potentially favoring a price increase for the second largest cryptocurrency by market cap.
Hougan expects the new Ethereum ETFs to be successful, attracting around $15 billion in new assets over their first 18 months on the market. Given the structural dynamics and market conditions, he finds it hard to imagine ETH not challenging its previous record. With ETH trading at $3,460 and showing positive price movements, the future looks promising for Ethereum investors awaiting the impact of ETF inflows on its price.