Bitwise Asset Management’s Chief Investment Officer has made bold predictions regarding the price of Ethereum (ETH) following the introduction of Ethereum Exchange-Traded Products (ETPs). According to the CIO, ETH prices could potentially surpass $5,000 by the end of the year as a result of ETP flows.
It is suggested that ETP flows may have a greater impact on Ethereum compared to Bitcoin. With projections indicating that ETPs could attract $15 billion in new assets over the next 18 months, the conditions seem ripe for a significant price rally in ETH. Currently trading at around $3,400, ETH is only 29% below its all-time high, signaling the potential for substantial gains.
The anticipated surge in Ethereum prices is said to be driven by fundamental supply and demand principles. While ETPs do not fundamentally alter the supply of ETH, they introduce new sources of demand into the market. Similar patterns were observed with Bitcoin following the launch of spot Bitcoin ETFs in the past.
Volatility Concerns
Despite the positive outlook, there are concerns regarding potential volatility in the weeks following the ETP launch. The transition of the $11 billion Grayscale Ethereum Trust (ETHE) to an ETP could lead to short-term selling, affecting price movement. However, the CIO remains optimistic that ETH will reach new record highs by the end of the year.
Several factors suggest that Ethereum could experience even higher gains from ETP inflows compared to Bitcoin. Ethereum’s lower inflation rate and the consumption of ETH by various applications contribute to a favorable supply-demand balance. The network’s proof of stake mechanism also reduces daily selling pressure on ETH, potentially leading to price appreciation.
Locking Supply and Increasing Demand
A significant portion of ETH is currently locked in staking contracts and decentralized finance smart contracts, reducing the available supply of the asset. About 40% of ETH is effectively off the market, which could amplify the impact of new demand from ETP inflows. Increased activity on the Ethereum network further adds to organic demand for ETH.
The introduction of Ethereum Exchange-Traded Products is expected to bring about substantial price gains for ETH. With the right conditions in place, Ethereum could potentially reach new all-time highs by the end of the year, driven by increased demand from ETP inflows and favorable supply dynamics. The market will continue to monitor the impact of these financial products on Ethereum’s price movements in the coming months.
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