Potential Downturn for Ethereum
Ethereum, currently trading at $3,410, may see its value tumble to $2,400 following the launch of spot Ether exchange-traded funds (ETFs). Andrew Kang, co-founder and partner at Mechanism Capital, shared this bearish outlook, predicting a nearly 30% decline from its current price.
In a June 23 post on X (formerly Twitter), Andrew Kang highlighted several factors that could limit the upside potential of an Ether ETF, contrasting it with Bitcoin's stronger institutional interest.
Limited Institutional Interest and Cash Flow Concerns
Kang’s key arguments for the anticipated downturn include:
- Minimal Incentives: Few incentives exist for investors to convert spot Ether into ETF form.
- Weak Cash Flows: Ethereum's network cash flows have not been particularly impressive.
- Institutional Interest: Unlike Bitcoin, Ethereum attracts less interest from institutional investors.
“How much upside would an ETH ETF provide? I would argue not much,” stated Kang. He anticipates Ether’s post-ETF launch price to range between $2,400 and $3,000. This forecast marks a significant shift from Ether’s previous peaks, such as over $4,000 in March.
Comparison with Bitcoin ETFs
Kang compared the expected inflows into spot Ether ETFs with those into spot Bitcoin ETFs:
- Spot Bitcoin ETFs: Attracted $5 billion in new funds within the first six months.
- Spot Ether ETFs: Expected to attract only 15% of the flows seen by Bitcoin ETFs, approximately $840 million in "true" inflows.
Kang elaborated on the market sentiment, saying, “I believe that the expectations of crypto natives are overinflated and disconnected from the true preferences of tradfi allocators. This implies that the ETF is more than priced in.”
Diverse Analyst Opinions and Future Projections
Not all analysts agree with Kang’s bearish outlook:
- Patrick Scott (Dynamo DeFi): Expects Ether to follow a similar directional movement as Bitcoin ETFs but does not foresee Ether’s price doubling.
- Van Eck: Projects that spot Ether ETFs could drive Ether’s price to $22,000 by 2030.
Kang also pointed out the challenges Ethereum faces in its investment pitch, describing it as potentially an "overpriced tech stock." He highlighted the removal of staking from the proposed spot Ether ETFs as another factor that might deter investor interest. Despite some institutional moves towards real-world asset tokenization on Ethereum, Kang remains skeptical about its impact on Ether’s price.
Market Dynamics and Future Scenarios
Kang’s predictions also extend to the ETH/BTC price ratio, which he believes could slide from 0.054 to as low as 0.035 over the next 12 months. However, he left room for optimism in this Eth news, suggesting that a Bitcoin rally to $100,000 could potentially lift Ether to new all-time highs within the next 6-9 months.
