Ethereum Spot ETF Impact: Will ETH Surpass $5,000? Bitwise Executive’s Price Prediction

Matt Hougan, the Chief Investment Officer of Bitwise, forecasts that Ethereum’s price could surpass $5,000 following the launch of the Ethereum spot ETF.

Despite initial market volatility due to potential outflows from the Grayscale Ethereum Trust, Hougan is confident in ETH reaching new highs by the end of 2024.

Discover the reasons behind this bullish prediction and the unique factors that could drive significant demand for Ethereum.

Record Highs Expected by the End of 2024

Matt Hougan, Chief Investment Officer of the U.S. crypto asset management firm Bitwise, predicted in an article published on July 16, 2024, that the price of Ethereum (ETH) will exceed $5,000 following the launch of the Ethereum spot ETF.

Hougan noted that there might be market instability in the initial weeks due to potential outflows from the Grayscale Ethereum Trust (ETHE) post-ETF launch. However, he expressed confidence that Ethereum would hit new highs by the end of 2024.

The article also outlines several reasons why ETH prices are expected to rise after the Ethereum spot ETF launch.

Reasons for Price Increase with Ethereum Spot ETF

The Ethereum spot ETF is anticipated to introduce a new source of demand for Ethereum, altering the supply-demand balance and potentially driving up prices.

When the Bitcoin spot ETF was launched in January 2024, the amount of BTC purchased by the Bitcoin ETF was more than double the amount produced by Bitcoin miners. (Miners produced 129,181 BTC, while the ETF purchased 263,965 BTC.)

While mined BTC could exert selling pressure, the fact that the ETF purchased more than twice that amount led to a rise in Bitcoin prices post-launch.

A similar impact is expected with the Ethereum spot ETF, potentially bringing in billions of dollars. The effect might be even more significant than with the Bitcoin ETF for three main reasons:

Lower Short-term Inflation Rate for ETH

When the Bitcoin spot ETF was launched, BTC’s inflation rate was 1.7%, with 328,500 BTC newly issued annually. This implied an annual purchase of $16 billion worth of BTC to withstand selling pressure.

In contrast, ETH’s inflation rate over the past year has been exactly 0%. A year ago, there were 120 million ETH, and the number remains the same.

Although a small amount of ETH is generated daily, users of Ethereum-based applications consume ETH, balancing the forces over the past year.

Increased Ethereum activity would mean higher ETH consumption, potentially benefiting investors.

ETH Stakers Do Not Need to Sell Unlike BTC Miners

Bitcoin miners need to sell mined BTC to cover the costs of mining equipment and electricity. However, Ethereum stakers do not need to sell the ETH they earn.

Ethereum’s Proof-of-Stake (PoS) system allows ETH holders to stake their tokens and earn new ETH rewards without incurring significant costs.

As such, even if Ethereum’s inflation rate exceeds 0%, large-scale sell-offs by stakers are unlikely.

28% of ETH is Staked

Staking involves locking ETH for a certain period, during which it cannot be sold.

Currently, 28% of all ETH is staked, and an additional 13% is locked in decentralized finance (DeFi) smart contracts, meaning roughly 40% of ETH cannot be easily sold.

These factors lead to the prediction that the new Ethereum ETP (exchange-traded product) could attract $15 billion in assets within the first 18 months post-launch.

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