Ethereum’s value could see a significant drop to around $2,400 following the launch of spot Ether exchange-traded funds (ETFs), according to Andrew Kang, a founder and partner at Mechanism Capital, a venture capital firm specializing in the cryptocurrency space.
At the time of writing, Ethereum (ETH) is trading at approximately $3,410, based on data from CoinGecko. A decline to $2,400 would represent a nearly 30% drop from its current value. In a June 23 post on X (formerly Twitter), Kang expressed skepticism about the potential positive impact of the ETF launch on Ethereum’s price.
Limited Institutional Interest in Ethereum
Kang argued that, unlike Bitcoin, Ethereum attracts less interest from institutional investors. This lower demand could result in minimal conversion of spot Ether into ETF form. He also noted that the network’s cash flows have not been particularly impressive, further dampening expectations for a significant price increase following the ETF launch.
Kang highlighted that spot Ether ETFs might only capture about 15% of the inflows that spot Bitcoin ETFs have experienced. He referenced estimates by Bloomberg analysts Eric Balchunas and James Seyffart, who suggested that Bitcoin ETFs have attracted between 10% and 20% of total flows.
Based on the approximately $5 billion in new funds that flowed into spot Bitcoin ETFs in their first six months, Kang extrapolated that spot Ether ETFs might attract around $840 million in “true” new inflows during the same period.
| Metric | Bitcoin ETFs | Ether ETFs |
|---|---|---|
| First 6 Months’ Inflows | $5 billion | $840 million |
| Expected Flow Percentage | 10-20% | 15% |
While Kang’s outlook suggests a bearish scenario for Ether post-ETF launch, not everyone shares his perspective. Patrick Scott, also known as Dynamo DeFi, believes that Ethereum’s price movements will mirror those of Bitcoin following the introduction of its spot ETFs. However, Scott does not foresee Ethereum’s price doubling anytime soon.
In contrast, asset management firm VanEck is optimistic about Ether’s long-term potential. They predict that spot Ether ETFs could help drive the price of Ether to as high as $22,000 by the year 2030.
Evaluating Ethereum’s Investment Appeal
Kang compared Ethereum to an overpriced tech stock, arguing that despite its potential as a decentralized financial settlement layer and Web3 platform, the current data doesn’t justify its high valuation. He pointed out that during the last surge in decentralized finance (DeFi) and non-fungible tokens (NFTs), Ethereum’s cash flow prospects seemed brighter. However, these conditions have not sustained.
- Decentralized Financial Platform: Promises as a financial layer and Web3 store are appealing but challenged by current data.
- Valuation Concerns: High price-to-sales and negative earnings ratios make it a tough sell for traditional financial analysts.
Impact of Staking Exclusion and Institutional Moves
Kang also noted that the unexpected approval of spot Ether ETFs might limit the ability of issuers to market these products effectively to institutional investors. The exclusion of staking from these ETFs could further deter investors who might otherwise consider converting their spot Ether holdings into ETF form.
Despite these challenges, Kang acknowledged that BlackRock and other financial institutions are starting to engage in real-world asset tokenization on Ethereum, though he remains uncertain about the immediate impact on Ether’s price.
Kang suggested that the ETH/BTC price ratio could decline from its current level of 0.054 to as low as 0.035 over the next year. However, he also mentioned that a significant rally in Bitcoin’s price, potentially reaching $100,000 in the next six to nine months, could lift Ether to new all-time highs alongside it.
Andrew Kang’s analysis provides a cautious outlook for Ethereum following the launch of spot ETFs. While there are differing views on Ether’s future, the cryptocurrency’s path will likely be influenced by institutional interest, market dynamics, and the broader crypto landscape.
Featured image credit: Hasan As ari via Vecteezy