Ethereum
Research Firm Predicts Ethereum Blast to $15,000 With ETFs
Michael Nadeau, founder of The DeFi Report, published an in-depth analysis of the implications of the approval of Ethereum (ETH) spot exchange-traded funds (ETFs) on the cryptocurrency’s price trajectory. This analysis follows a significant study regulatory wink of the United States Securities and Exchange Commission (SEC), which approved 19b-4 filings for eight leading financial entities: Grayscale, Bitwise, BlackRock, VanEck, Ark 21Shares, Invesco, Fidelity and Franklin.
These approvals, granted in an omnibus collective order on May 23, paved the way for the final steps, which involve waiting for S-1 filing approvals before these spot ETFs can begin trading.
Why Ethereum Could Skyrocket to $15,000
The report builds on projections from Bloomberg ETF experts such as James Seyffart and Eric Balchunas, suggesting that inflows into Ethereum ETFs could be between 10% and 20% of those seen by Bitcoin ETFs. “The logic behind these projections relies on a few key observations: Currently, there is less institutional interest in ETH, and it is inherently more complex than BTC. Additionally, ETH futures ETF volume is significantly lower than BTC, ranging from 10-20%, and ETH spot trading volumes are about half that of BTC,” says Nadeau.
He added that “ETH is more difficult to understand than BTC. The volume of ETH futures ETFs is lower than that of BTC (10-20%). ETH spot trading volumes are lower than BTC (around 50%). ETH represents approximately 1/3 of the market capitalization of BTC.
However, according to the researcher, Ethereum’s dynamics offer a unique perspective compared to Bitcoin. “Ethereum validators do not incur the substantial operating expenses that Bitcoin miners do, which alleviates structural selling pressure on the asset,” says Nadeau. This difference is key to understanding the supply dynamics of Ethereum versus Bitcoin.
Nadeau also looks at the current state of Ethereum’s on-chain business. A substantial portion of Ethereum, around 38%, is effectively “soft locked” by various mechanisms such as staking contracts and DeFi applications. This scenario, as Nadeau points out, “helps reduce the available circulating supply, thereby contributing to a decrease in ETH balances on exchanges to levels not seen since 2016 – currently, this represents less than 11% of the ‘circulating supply’.
The concept of reflexivity in Ethereum’s market behavior also receives particular attention in Nadeau’s report. “ETH is more reflexive than BTC. This reflexivity could be expressed through price action driving on-chain activity, which would result in more ETH being burned, which could drive more narratives, more price action, more on-chain activity, etc. ETH burned», specifies Nadeau, suggesting a cyclical effect this could significantly amplify Ethereum’s market presence and valuation.
Exploring potential market scenarios, Nadeau questions the extent of rebalancing that could occur from spot Bitcoin ETF holders to Ethereum, the appeal of a 50/50 BTC and ETH allocation and the shift potential for institutional direction towards Ethereum. He hypothesizes: “If momentum hits ETH, will we see the “reflexivity flywheel” kick in? How many institutions are currently on the sidelines, having missed out on BTC? Are they going to go all out on ETH?
Concluding his analysis, Nadeau presents a valuation framework that predicts that the cryptocurrency market will reach a market capitalization of $10 trillion. He states: “Given our fundamental views on ETH, we believe it is more likely that ETH will outperform Bloomberg’s projections of 10-20% of net BTC inflows. In this scenario” and predicts that “ETH could reach a market cap at the peak of the cycle of $1.8 trillion, which would cost ETH at around $14,984 (3.9x), assuming it does not There is no change in the offer. He continues: “For reference, if Bitcoin reaches a market cap of $4 trillion, the price of BTC would be $202,000 (2.8x)” at the peak of the cycle.
At press time, ETH was trading at $3,823, still about 29% off its 2021 all-time high.
Featured image created with DALL·E, chart from TradingView.com