Ethereum
The leading cryptocurrency will rise by 116%, according to Standard Chartered. Is this a purchase?
A Standard Chartered analyst expects Ethereum to more than double by the end of the year. Here’s how this bullish analysis holds up and how it moved the markets this week.
Analysts at a major British bank say Ethereum (ETH 0.64%) is expected to more than double by the end of 2024. Is this projection logical?
Bullish analysis of Ethereum from Standard Chartered
Geoff Kendrick, Head of Emerging Markets Crypto and FX Research at Chartered standard (OTC: SCBF.F), set a year-end price target of $8,000 on Ethereum (ETH 0.64%) at the start of the week.
Speaking to crypto news site The Block on Tuesday, Kendrick predicted that the US Securities and Exchange Commission (SEC) would approve the former. exchange traded funds (ETF) followed Ethereum Spot Price. He argued that the approval would spark large inflows of money into the Ethereum cryptocurrency, similar to the inflows that followed the approval of spot Bitcoin ETFs in January.
The analyst also noted that he correctly described the money flow effects of the Bitcoin ETF approval and highlighted the long-term price increases that are expected to result from these substantial investment moves.
Be careful, Kendrick based his Ethereum price target on his last Bitcoin (BTC 1.15%). In other words, Ethereum ETFs seem like good news for the crypto market as a whole, not necessarily driving Ethereum prices up faster than the rest of the sector. Historically, Ethereum has closely followed Bitcoin’s price movements due to their high correlation with the market and mixed investor sentiment.
“Given that we now see Bitcoin reaching the $150,000 level by the end of 2024, this would imply an $8,000 level for Ether,” the Standard Chartered analyst said.
SEC moves closer to approving Ethereum ETFs
Two days later, the SEC approved a rule change that will result in the first Ethereum-based ETFs appearing on U.S. markets. The funds don’t hit the market immediately, because the SEC must review each application in detail before approving anything. While this process could take months, the established precedent of Bitcoin ETFs suggests that SEC approval could be expedited. There is still a big step towards final approvals, which now appears to be only a matter of time.
Crypto investors were excited by Standard Chartered’s forecast, sending the price of Ethereum up 23% the next day, while Bitcoin rose as much as 7%.
Market reactions to ETF forecasts and news
However, the two largest cryptocurrencies barely moved according to real ETF news. Ethereum has remained stable since Kendrick’s forecast and Bitcoin is down a few percent on Friday.
But Kendrick’s analysis still seems correct. The combination of ETF approvals and the recent halving of Bitcoin should indeed lead to a further rise in the prices of Bitcoin, Ethereum and many others small altcoins over the next year. Cathie Wood, growth investing star from Ark Invest also set its year-end Bitcoin target at around $150,000, with much more ambitious long-term goals in mind.
Evaluation of Kendrick’s analysis and its implications
From a simple logical point of view, the idea of rising cryptocurrency prices makes sense.
Bitcoin market value is strengthened on both sides of calculating supply and demand. Halving Bitcoin mining rewards makes it harder to obtain freshly minted digital coins. At the same time, the new ETFs open the floodgates to almost direct Bitcoin investments by several new types of buyers: retail investors can now access Bitcoin ETFs (and soon Ethereum ETFs) in their retirement accounts, while Institutional fund managers can rely on familiar funds. ETF instead of opening new accounts on unapproved crypto exchanges.
Burning the value candle at both ends, Bitcoin is experiencing higher demand and strictly limited supply. That’s a recipe for higher prices, especially since the necessary Bitcoin mining process no longer makes economic sense unless coin prices rise enough to compensate for the lower rewards.
And where Bitcoin goes, other cryptocurrencies tend to follow. In particular, Ethereum tends to follow the Bitcoin price chart very closely:
Ethereum Price data by Y Charts
Balancing Your Portfolio with Crypto Investments
Standard Chartered’s Ethereum target sits 116% above the smart contract pioneer’s current price (and 160% beyond where it stood before Kendrick spoke to The Block). I can’t promise it will hit this specific target, but I’m confident that Ethereum and Bitcoin will rise as the year goes on.
Of course, unexpected twists and turns can throw a spanner in the works, and other unforeseen events could instead push cryptos even higher. You never really know what’s going to happen in this young and volatile market until it happens.
Therefore, I would not recommend backing the truck, betting on the literal farm, or going overboard with crypto investments at this time. A diversified approach with crypto plays a modest role in a diversified portfolio will allow you to reap the benefits of a price spike without risking everything. Ethereum looks like a solid buy today, but I wouldn’t hold my breath waiting for Kendrick’s specific target of $8,000 to materialize.
Anders Bylund has positions in Bitcoin and Ethereum. The Motley Fool posts and recommends Bitcoin and Ethereum. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.