- Spot Ether ETFs could drive the price of Ethereum down to $2,400.
- Institutional interest in Ethereum is lower than in Bitcoin, which affects ETF conversion rates.
Like ether [ETH] is lagging behind Bitcoin in performance, its price is down 5.1% in the last 24 hours, bringing its current valuation to $3,315.
This recent price drop reflects broader market trends and investor sentiment. Despite this decline, analysts expect a further decline, which may be caused by new financial products coming onto the market.
Andrew Kang of Mechanism Capital speculates that the introduction of spot Ethereum exchange-traded funds (ETFs) could drive the price of Ethereum down to $2,400.
ETH ETFs to Lower the Price of Ethereum?
The rationale behind Kang’s prediction lies in the relative lack of institutional interest in Ethereum as opposed to Bitcoin.
The founder of Mechanism Capital revealed that the lack of strong incentives for converting spot ETH into ETFs, coupled with unimpressive network cash flows, presents a challenging outlook for Ethereum’s immediate future in the ETF market.
These factors may contribute to Ethereum’s struggle to maintain its market price in the face of changing market structures and investor preferences.
Furthermore, it is estimated that ETH’s potential inflows into the ETF landscape will attract approximately 15% of the flows that Bitcoin ETFs have generated, based on extrapolations of Bitcoin ETF performance.
Early data shows that spot Bitcoin ETFs have attracted approximately $5 billion in new funds within six months of their launch.
Applying these numbers to Ethereum, Ethereum-based ETFs are expected to see actual inflows of around $840 million in a similar time frame.
In this regard, Kang expresses skepticism about the alignment between the crypto community’s expectations and the preferences of traditional financial (tradfi) allocators, indicating that the market may already have priced in the effects of the ETF’s launch.
Challenges in market perception
Furthermore, Ethereum’s conceptual pitch as a decentralized financial settlement layer and foundation for Web3 applications offers potential. However, according to Kang, current data suggests it could be a challenging sell.
In particular, the reduction in network transaction costs due to reduced activity in decentralized finance and non-fungible tokens has shifted perspectives, potentially comparing ETH to overvalued technology stocks in terms of financial metrics.
Furthermore, according to Kang, the recent green light for Ethereum ETFs was somewhat unexpected, leaving issuers little time to develop and disseminate effective marketing strategies.
He added that removing strike options from the ETF proposals could further deter investors from switching their holdings, impacting expected capital inflows into these funds.
Concluding this insight, Kang noted:
“Does this mean ETH will go to zero? Of course not, at a certain price it will be considered a good value and when BTC rises in the future it will be dragged down to some extent. Before the launch of the ETF, I expect ETH to trade between $3,000 and $3,800. After the launch of the ETF, my expectation is $2,400 to $3,000. However, if BTC moves to $100,000 in late Q4/Q1 2025, that could drag ETH to ATHs, but with a lower ETHBTC. “
Source: Andrew Kang on X
Are There Bearish Signs from ETH?
In light of Andrew Kang’s pessimistic view of Ethereum, it is worth examining Ethereum’s fundamentals to validate these concerns.
Facts from CryptoQuant reveals a worrying trend in one of Ethereum’s key metrics: there has been a notable increase in Ethereum deposits on exchanges, indicating a possible increase in selling pressure.
Source: CryptoQuant
This indicator is consistent with IntoTheBlock data, which shows a significant reduction in large ETH transactions (those above $100,000).
Read Ethereum’s [ETH] Price forecast 2024-2025
These transactions have fallen from over 10,000 at the end of last month to less than 4,000 today.
Source: IntoTheBlock
Despite these bearish signs, a recent report from AMBCrypto highlights one increase in Ethereum daily active addressesadding a layer of complexity to the dynamics of the market.