- Spot Ether ETFs could push Ethereum’s price down to as low as $2,400.
- Institutional interest in Ethereum is lower compared to Bitcoin, which impacts ETF conversion rates.
As Ethereum [ETH] is lagging behind Bitcoin in performance, with its price falling 5.1% in the last 24 hours and currently trading at $3,315.
This recent price decline reflects general market trends and investor sentiment. Despite this decline, analysts are predicting a further decline, possibly caused by new financial products on the market.
Andrew Kang of Mechanism Capital speculated that the launch of spot Ethereum exchange-traded funds (ETFs) could push the price of Ethereum to as low as $2,400.
Will ETH ETFs depress Ethereum price?
The reason for Kang’s prediction lies in the comparatively low institutional interest in Ethereum compared to Bitcoin.
The founder of Mechanism Capital revealed that the lack of strong incentives to convert spot ETH into ETFs, coupled with unimpressive network cash flows, presents a challenging outlook for Ethereum’s immediate future in the ETF market.
These factors could contribute to Ethereum struggling to maintain its market price in the face of changing market structures and investor preferences.
Furthermore, based on extrapolations of Bitcoin ETF performance, the potential inflow of ETH into the ETF landscape is estimated to be around 15% of the inflows that Bitcoin ETFs have achieved.
Initial data suggests that spot Bitcoin ETFs attracted around $5 billion in new funds within six months of their launch.
Applying these numbers to Ethereum, it is predicted that Ethereum-based ETFs could see actual inflows of around $840 million over a similar period.
In this context, Kang expresses skepticism about the alignment between the expectations of the crypto community and the preferences of investors in traditional finance (Tradfi), suggesting that the market may have already “priced in” the impact of the ETF launch.
Challenges in market perception
In addition, Ethereum’s concept as a decentralized financial settlement layer and basis for Web3 applications holds potential, but current data suggests it could be a difficult sell, according to Kang.
In particular, the reduction in network transaction fees due to reduced activity in decentralized finance and non-fungible tokens has caused a shift in perspective, potentially making ETH compare to overvalued tech stocks in terms of financial metrics.
In addition, according to Kang, the recent regulatory approval of Ethereum ETFs was somewhat unexpected, as it left issuers with little time to develop and distribute effective marketing strategies.
He added that removing staking options from ETF proposals could further discourage investors from converting their shares, which in turn would impact the expected capital inflow into these funds.
In conclusion, Kang stated:
“Does this mean ETH will drop to zero? Of course not, at a certain price it is considered good value for money and if BTC rises in the future it will be pulled up to some extent. Before the ETF launch I expect ETH to trade between $3,000-$3,800. After the ETF launch I expect $2,400-$3,000. However, if BTC rises to $100,000 by the end of Q4/Q1 2025 it could pull ETH to ATHs but with ETHBTC in the red.”
Source: Andrew Kang via X
Are there any bearish signs of ETH?
Given Andrew Kang’s pessimistic view on Ethereum, it is worth examining Ethereum’s fundamentals to confirm these concerns.
Data by CryptoQuant reveals a worrying trend in one of Ethereum’s key metrics: there has been a significant increase in Ethereum deposits on exchanges, indicating a possible increase in selling pressure.
Source: CryptoQuant
This indicator is consistent with IntoTheBlock’s data, which shows a significant decline in large ETH transactions (over $100,000).
Read Ethereum’s [ETH] Price forecast 2024-2025
These transactions have declined from over 10,000 at the end of last month to under 4,000 today.
Source: IntoTheBlock
Despite these pessimistic signs, a recent report from AMBCrypto highlights a Increase in Ethereum daily active addresseswhich makes market dynamics even more complex.