Potential Downturn for Ethereum
Ethereum, currently trading at $3,410, could crash to $2,400 with the launch of a spot ETH exchange-traded fund (ETF). Andrew Kang, co-founder and partner at Mechanism Capital, shares this bearish outlook, predicting a decline of around 30% from current prices.
Andrew Kang highlighted several factors that could limit the upside potential of an Ethereum ETF in a June 23 post on X (formerly Twitter), contrasting it with the strong institutional interest in Bitcoin.
Limited institutional interest and cash flow concerns
Mr. Kang argued that a recession was expected, making the following key arguments:
- Minimum incentive: There is little incentive for investors to convert their spot ether into ETFs.
- Weak cash flow: Ethereum’s network cash flow hasn’t been particularly impressive.
- Institutional Interests: Unlike Bitcoin, Ethereum receives less attention from institutional investors.
“How high will the ETH ETF go? I would argue no,” Kang said. He expects the price of Ether to be between $2,400 and $3,000 after the ETF launch. This forecast represents a significant change from Ether’s previous highs, such as over $4,000 in March.
Comparison with Bitcoin ETFs
Kang compared the expected inflows into spot Ether ETFs with inflows into spot Bitcoin ETFs.
- Spot Bitcoin ETF: We raised $5 billion in new funding in the first six months.
- Spot Ether ETF: It is expected to attract only 15% of the flows seen in Bitcoin ETFs, with “actual” inflows coming in at around $840 million.
Elaborating on market sentiment, Kang said, “I think crypto native expectations are overblown and disconnected from the true preferences of TradeFi allocators, which means ETFs are more than priced in.”
Various analyst opinions and future forecasts
Not all analysts agree with the bearish outlook.
- Patrick Scott (Dynamo DeFi): I expect Ethereum to move in a similar direction to the Bitcoin ETF, but I don’t expect Ethereum’s price to double.
- Van Eck: Project to mine Ethereum ETF could push Ethereum price to $22,000 by 2030
Kang also pointed to challenges Ethereum faces in its investment pitch, describing it as a potentially “overvalued tech stock.” He highlighted the removal of staking from the proposed spot ETH ETF as another factor that could dampen investor interest. Despite some institutional moves toward tokenizing real assets on Ethereum, Kang remains skeptical about the impact on ETH’s price.
Market Dynamics and Future Scenarios
Kang’s prediction also extends to the ETH/BTC price ratio, which he believes could drop 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 if Bitcoin rallies to $100,000, Ether could hit a new all-time high in the next 6-9 months.