Bitwise’s Chief Investment Officer, Matt Hougan, has made an exciting prediction for Ethereum enthusiasts: the introduction of spot Ethereum ETFs is expected to drive the price of ether to new all-time highs, potentially exceeding $5,000. This bullish forecast stems from Hougan’s belief that these ETFs will create a significant influx of demand for ether, similar to what happened with bitcoin when its spot ETFs were launched.
In a detailed note to clients, Hougan explained that while the initial weeks after the Ethereum ETFs launch might be turbulent, he expects ether to hit new highs by the end of the year. This is due to the anticipated shift of funds from the $11 billion Grayscale Ethereum Trust (ETHE) to these new spot ETFs.
The Securities and Exchange Commission (SEC) has already approved several spot Ethereum ETF applications from major players, including Bitwise, BlackRock, and Fidelity. However, trading can only begin once their S-1 registration statements are effective, likely around July 23.
Hougan pointed out several key factors that could make the impact on ether even greater than what was observed with bitcoin. Firstly, Ethereum’s inflation rate has been nearly zero over the past year, compared to bitcoin’s 1.7% at the time of its ETF launches. This means less ether needs to be bought just to maintain its current price level. Additionally, unlike bitcoin miners who sell newly mined coins to cover costs, ether stakers have much lower costs and are less likely to sell their rewards, reducing selling pressure.
Another crucial point Hougan mentioned is the significant amount of ether that is locked up in staking and DeFi contracts, making it unavailable for sale. Currently, 27.5% of ether is staked and another 13% is locked in DeFi, totaling around 40% of ether supply that is not in circulation.
With these dynamics in play, Hougan is optimistic that spot Ethereum ETFs will bring substantial inflows, pushing ether prices higher than ever before. If the inflows match his expectations, ether could not only surpass its previous high of $4,875 but potentially reach new records.
