An event is approaching that could boost the price of Ethereum. It is the launch of its exchange-traded funds (ETF) in the United States, something that — according to some versions — will happen next week.
According to crypto ETF issuer Bitwise these instruments will propel the price of ETH to new all-time highs above $5,000 (USD). The cryptocurrency is currently trading 30% below its record high of $4,900 reached almost three years ago in 2021.
Matt Hougan, Bitwise’s chief investment officer, believes the rally won’t happen immediately. He expects price action to be choppy at first. In this regard, he doesn’t rule out a possible “sell the news” scenario that involves a temporary pullback, as happened with bitcoin after the launch of its ETF in January.
A news selling strategy refers to the act of selling an asset when an expected positive event occurs in order to take profits, after buying it in anticipation of it. This is why this tactic can lead to a price drop when it occurs massively. Once this phase is over, the market will recover if the bullish fundamentals solidify.
Beyond its short-term performance, the Bitwise executive maintains his bullish expectations for the end of 2024. “By the end of the year, I am confident that there will be new highs,” he said of ETH. “And if the flows are stronger than many market commentators expect, the price could be much higher still,” he said.
According to projections by Citibank, ether ETFs could capture up to 35% of the capital of bitcoin ETFs. This is equivalent to around USD 5 billion in the first six months. Meanwhile, other specialists, such as analyst James Seyffart, predict a 20% capture.
Bitwise believes that Ethereum ETFs could be a success, raising a total of USD 15 billion over their first 18 months.
Bitwise thus joins the list of entities that have expressed their price projections for ETH with the influence of ETFs. Among them are the research firm Steno Research , which similarly visualizes a price of USD 6,500 by the end of the year, and the bank Standard Chartered , with a more bullish prediction seeing USD 8,000 by then.
ETH would have more impact than BTC with ETFs
For Bitwise, the capital raised by ether ETFs will have a bigger impact than that seen in bitcoin, which hit a new all-time high price two months after its launch.
As an argument, he points out that, unlike bitcoin miners , ether stakers do not have to sell ETH to pay operating costs, so they do not generate as much downward pressure. In addition, he highlights that 28% of ETH is staked , or stored for the long term, which reinforces the price. And he adds that the short-term inflation rate of ETH is 0%, while that of bitcoin when the ETFs were launched was 1.7%, so there is a demand that meets the supply.
Amid these prospects, cryptocurrency prices have seen a rally this week, as the debut of ether ETFs draws closer. According to sources close to the matter, the launch may take place as early as Tuesday, July 23.
Financial advisor John Bowman, in line with this, sees a bullish case for ETH because “many speculators may view these ether spot ETFs as a proxy for investing in Web3.” He attributes this to the fact that Ethereum not only runs the cryptocurrency, but is a network that enables smart contracts and decentralized applications.
Due to the network upgrades, he notes that “Ethereum is improving,” even though the price is lagging. He stresses that after BTC’s outperformance, there are usually longer periods of outperformance for ETH. Therefore, he believes that ETFs can act as the catalyst for this.
