Matt Hougan, Chief Investment Officer at Bitwise Asset Management, forecasted that Ethereum’s price could surge past $5,000 following the launch of Ethereum ETFs. Hougan believes that ETF inflows will drive Ethereum to all-time highs by year-end, predicting significant new sources of demand akin to Bitcoin’s post-ETF launch experience.
Hougan explained that while the initial weeks might be turbulent due to potential outflows from the $11 billion Grayscale Ethereum Trust (ETHE) as it converts to an ETF, the primary driver for Ethereum’s price surge will be the new demand from ETFs. This new demand does not alter Ethereum’s underlying supply, creating a favorable supply-demand dynamic. He noted that Bitcoin ETFs have already purchased more BTC than miners have produced since their launch, significantly boosting Bitcoin’s price.
Hougan identified three key factors that could amplify Ethereum’s price increase:
1. Inflation Rate: Ethereum’s inflation rate has been 0% over the past year, maintaining a constant supply of 120 million ETH. This contrasts with Bitcoin’s 1.7% inflation rate at the time of its ETF launch. Ethereum-based stablecoins and tokenized funds have helped maintain this equilibrium, supporting price appreciation.
2. Staker Dynamics: Unlike Bitcoin miners who often need to sell their BTC to cover operational costs, Ethereum stakers are under less pressure to sell. This results in less forced selling each day compared to Bitcoin, potentially leading to a more stable and higher ETH price.
3. Staked ETH: A significant portion of ETH is staked or locked in decentralized finance (DeFi) contracts, effectively reducing the available supply. Currently, 28% of all ETH is staked, taking it off the market and reducing the overall supply available for trading.
Hougan projects that Ethereum ETFs will attract $15 billion in new assets over the first 18 months. This influx could drive ETH from its current price of approximately $3,400 to surpass its previous records. With ETH trading around $3,400—just 29% below its all-time high—Hougan concluded that the introduction of ETFs and the resulting demand dynamics make it likely that Ethereum will challenge and surpass its previous highs.