Bitwise CIO Matt Hougan predicts that the launch of spot Ethereum ETFs will drive the digital asset’s value to new all-time highs, potentially surpassing $5,000. Despite the initial potential for money to flow out of the $11 billion Grayscale Ethereum Trust after its conversion, Hougan believes that spot ETFs typically generate new demand for commodities like ETH.
Hougan outlined three structural reasons why he believes that the inflows into spot ETH ETFs will have a more significant impact than they did for Bitcoin. Firstly, ETH has a 0% short-term inflation rate, unlike Bitcoin’s 1.7% when its ETFs began trading. Additionally, Ethereum’s stakers do not have significant direct costs and are not forced to sell the ETH they produce, reducing selling pressure.
Approximately 40% of the Ethereum supply is locked in staking and smart contracts, making it unavailable for sale. Hougan predicts that ETH ETF assets under management could reach $15 billion within their first 18 months of trading, potentially leading to ETH challenging its all-time high price.
It’s worth noting that Ethereum’s inflation rate fluctuates but has recently been reported as being deflationary due to ETH being burned through transaction fees. However, the surge in layer-2 usage has resulted in fewer mainnet transactions, pushing Ethereum back into inflationary territory.
Overall, Hougan is confident that the upcoming spot Ethereum ETFs will drive the digital asset’s value to new heights, possibly challenging its previous all-time high. The structural reasons outlined by Hougan suggest that ETH may see increased demand and reduced selling pressure, potentially leading to a significant price increase in the near future.
