According to Reuters, Ethereum, the second largest cryptocurrency in the world, may be on the verge of its «moment in the sun». In the current year, Ethereum has remained in the shadow of Bitcoin, which was rapidly rising due to the emergence of new American exchange-traded funds (ETFs) tracking its price. However, with the looming introduction of ETFs on Ethereum, many market participants predict that a price increase for Ethereum may be imminent, and it could surpass its historical peak of November 2021 when it reached $4,867.60.
Market Analysis
Thomas Perfumo, head of strategy at the cryptocurrency exchange Kraken, noted that Ethereum has approximately half the spot liquidity compared to Bitcoin. This means that a smaller amount of dollars will be required for a significant price change. Perfumo believes that Ethereum’s lower liquidity could result in more significant price fluctuations with the influx of new investments into the market.
Recent events, such as the potential dumping of tokens from the bankrupt Japanese exchange Mt. Gox, have caused serious disruptions in the cryptocurrency market. This has negatively impacted both Bitcoin and Ethereum. Other factors, such as changes in the interest rate of the US Federal Reserve and upcoming presidential elections, may also influence the cryptocurrency markets.
Jag Kuner, head of derivatives at the cryptocurrency exchange Bitfinex, advises market participants to closely monitor the return of volatility in both traditional and cryptocurrency markets. Regulatory changes and macroeconomic policies will play a crucial role in determining market dynamics.
Outlook
In the spring of 2023, Bitcoin reached new records, jumping to $73,803.25, following the launch of the first spot ETFs on Bitcoin. Meanwhile, Ethereum remained far from its historical peak, trading at $4,093.7 in March. However, expectations for Ethereum’s price increase may change with the introduction of ETFs on Ethereum in the coming weeks. Experts note that the limited supply of ETH and high demand for ETFs may have a significant impact on the token’s price, possibly even greater than on Bitcoin.
According to Morningstar Direct, new ETFs on Ethereum may not generate the same excitement as spot ETFs on Bitcoin, which attracted around $38 billion in assets as of the end of June. However, as shown by research from Grayscale Investments, which plans to convert its ETH trust into an ETF, spot ETH-ETFs may meet 25%-30% of the demand for Bitcoin funds. Zach Pandl, managing director of research at Grayscale, noted that considering Ethereum’s market capitalization, which is about one-third of Bitcoin’s capitalization, each dollar inflow into an ETF on Ethereum could have a comparable impact on its price.
The difference between Ethereum and Bitcoin lies in the ability to stake or lock it in smart contracts, reducing the available supply for new ETFs. Pandl estimates that around 30% of Ethereum reserves are staked, and an additional 10% is locked in smart contracts, which could also contribute to its price increase.
Matt Hougan, chief investment officer at Bitwise, emphasized that the increase in demand for Bitcoin ETFs occurred due to higher demand than new supply. In the case of Ethereum, considering its limited supply, the situation may be even more pronounced.
Price Predictions
Forecasts regarding the impact of new ETFs on Ethereum’s price vary. According to Standard Chartered, by the end of the year, ETH could reach $8,000. At the same time, VanEck, planning to launch a spot ETF on Ethereum, has raised its target price for the token to $22,000 by 2030.
However, some analysts warn that the potential impact of new ETFs may already be reflected in Ethereum’s current price. Despite ETH not reaching its historical peak, its value has increased by over 29% this year. Zach Pandl of Grayscale noted that the valuation of Bitcoin and Ethereum is already higher than at the launch of Bitcoin funds earlier this year, which may indicate a less significant effect from new ETFs on Ethereum.
