said Michael Nadeau, founder of The DeFi Report published An in-depth look at the implications of the approval of exchange-traded funds (ETFs) for Ethereum (ETH) on the cryptocurrency's price trajectory. This analysis comes on the heels of significant regulatory approval from the US 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 a collective omnibus order on May 23, paved the way for the final steps, which include waiting for signatures of S-1 filings before the spot ETFs can begin trading.
Why could Ethereum price rise to $15,000?
The report relies on forecasts by Bloomberg ETF experts, such as James Seyfart and Eric Balchunas, suggesting that inflows into Ethereum ETFs could range between 10-20% of those seen in Bitcoin ETFs. “The logic behind these forecasts is based on some key observations – currently, there is less institutional interest in ETH, and it is inherently more complex than BTC. The volume of ETH futures ETFs is also much lower than that of BTC, ranging from 10 to 20%, and ETH's spot trading volumes are roughly half of BTC's,” explains Nadeau.
He added, “ETH is more difficult to understand than BTC. ETH futures ETF volumes are lower than BTC (10-20%). ETH spot trading volumes are lower than BTC (about 50%). ETH is about a third of the market cap.” For BTC.”
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However, according to the researcher, Ethereum's dynamics offer a unique perspective when compared to Bitcoin. “Ethereum validators do not incur the large operating expenses that Bitcoin miners do, which alleviates structural selling pressure on the asset,” Nadeau says. This difference is crucial in understanding the supply-side dynamics of Ethereum compared to Bitcoin.
Nadeau also delves into the current state of Ethereum chain activities. A large portion of Ethereum, about 38%, is “soft locked” via various mechanisms such as staking contracts and DeFi applications. This scenario, Nadeau points out, “helps reduce the available circulating supply, contributing to a decline in Ethereum balances on exchanges to levels not seen since 2016 – currently, this amounts to less than 11% of circulating supply.”
The concept of reflexivity in Ethereum market behavior also receives significant attention in the Nadeau report. “ETH is more reflective than BTC. This reversal can be expressed by price action driving onchain activity, burning more ETH, which can lead to more listing, more price action, more onchain activity, burning More ETH,” Nadeau explains, suggesting a cyclical effect that could be dramatically amplified. Ethereum market presence and evaluation.
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Exploring potential market scenarios, Nadeau questions the extent of rebalancing of Bitcoin ETF holders towards Ethereum, the attractiveness of a 50/50 BTC and ETH allocation, and the potential shift of institutional focus towards Ethereum. “If the momentum reaches ETH, will we see the ‘reflexive flywheel’ activated? How many institutions are on the sidelines now, having missed out on Bitcoin? Will they go all the way to ETH?” he posits.
Concluding his analysis, Nadeau offers a valuation framework that expects the cryptocurrency market to reach a market cap of $10 trillion. “Given our fundamental views on ETH, we believe ETH is likely to outperform Bloomberg's forecast of 10-20% of net BTC inflows,” he stated. “Under this scenario,” he predicts, “ETH could gain market value.” At the cycle peak of $1.8 trillion, that would price ETH at around $14,984 (3.9x), assuming no change in supply. He continues: “For reference, if Bitcoin reaches a market cap of $4 trillion, that will trigger pricing Bitcoin at $202,000 (2.8x)” at the peak of the cycle.
At press time, Ethereum was trading at $3,823, still about 29% away from its all-time high in 2021.
Featured image created with DALL·E, chart from TradingView.com
