Popular cryptocurrency analyst Degentrading (@degentradingLSD) made a bold prediction that the price of Ethereum will reach $6,000 by September 2024. This prediction comes in response to an analysis by Mechanism Capital founder Andrew Kang, who expects Ethereum to perform poorly despite the imminent launch of the Ethereum price. Immediately in the United States. ETFs.
Andrew Kang’s analysis predicts a continuation of the downward trend for ETHBTC, with the ratio expected to range between 0.035 and 0.06 over the next year. In his detailed post on X, Kang expressed doubts about Ethereum’s potential, even though the ETF’s launch was just days away.
Why Ethereum Price Could Reach $6,000 by September?
However, Degentrading presented a counterargument in A string On
“Before the ETF was created, it was very difficult to cash out and stay on the CME because of margin requirements,” he explains. “So the cap on underlying trades would probably have been capped at that amount.” This view suggests that the emergence of the ETF could significantly ease trading restrictions, potentially opening up a significant influx of capital.
However, he mitigates this by discussing the challenges posed by the extinction of major brokers such as Genesis, which complicates spot borrowing as a hedge against CME futures. According to degentrading, “Unless market makers can repeatedly force a bid/ask spread, they are effectively taking a loss. Therefore, the huge amount of trades based on the CME should be in the minority. I would peg the number at $1-2 billion as a limit.” At most, this leaves an estimated $7 billion in potential flows, a figure he described as “heavily dependent on assumptions.”
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Degentrading contrasts Ethereum’s position with that of Bitcoin, and criticizes the sentiments of analysts like Eric Balchunas. “There is nothing in traditional finance as exciting as technology. Bitcoin has the branding of digital gold or millennial gold,” he points out. Gold’s market capitalization is about $15 trillion. In contrast, Ethereum is seen as a decentralized global settlement layer or world computer, where The US stock market is already worth $50 trillion and he argues that this sets a much higher ceiling for Ethereum.
He also explains that in his discussions with traditional finance (tradfi) professionals, there is more enthusiasm for ETH and even SOL than for BTC. “People are more excited about ETH or SOL for that matter. Hence, I would peg the flow conversion rate at half the price of Bitcoin, which translates to about $3-4 billion to ETH,” asserts DegentTrading.
One of the main points of the degentrading argument is the relative illiquidity of Ethereum compared to Bitcoin. He highlights that while Ethereum is about a third the size of Bitcoin, its liquidity is only about 10% of Bitcoin. “This means that an influx of between $3 and $4 billion will materially move Ethereum,” he asserts. This lack of liquidity may lead to large price movements with relatively lower capital flows.
Addressing the current market situation, Degentrading points to the general gloomy sentiment on Crypto Twitter (CT), as it considers it the best technical setup for Ethereum. “On the cusp of launching an ETH ETF, you have people making forecasts of $500 million in inflows over six months. That’s the best technical setup for ETH,” he points out.
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An important factor in the degentrading analysis is the expected conversion of Grayscale’s Ethereum Trust (ETHE) into an ETF. He notes that ETHE will likely face much less selling pressure compared to Grayscale Bitcoin Trust (GBTC) due to its lower lender burden. “ETHE is also likely to face much less selling pressure than GBTC due to its much lower lender burden,” he notes.
Impact of cash and carry trades
Andrew Kang responded to the analysis of the economic deterioration, highlighting the involvement of large funds such as Millennium, which has $2 billion worth of ETFs. Kang points out that such funds engage in fundamental trading and are not just long-term investment funds. “Millennium alone has $2 billion in ETFs. It’s not a long-only ETF. They do these kinds of fundamental trades. This is just one fund from an old deposit,” Kang said.
Degentrading acknowledged this but emphasized the cost implications of holding a cash and carry position. He said that the cost of holding such positions leads to large amounts being realized, which affects the profitability of the market maker. “Based on this thinking, the cost of holding cash and carry would net $300 million to Millennium and cost the market maker that amount, meaning the delta is borne by naked delta in the futures,” DegentTrading responded.
At press time, Ethereum was trading at $3,362.90.
Featured image created with DALL·E, chart from TradingView.com