Matt Hougan Predicts Ethereum to Surge Beyond $5,000 with Launch of Spot ETFs

Matt Hougan Predicts Ethereum to Surge Beyond $5,000 with Launch of Spot ETFs

Matt Hougan, Chief Investment Officer at Bitwise, a crypto asset management firm, believes that the introduction of spot Ethereum exchange-traded funds (ETFs) could have a more significant impact on ether’s price compared to similar products for bitcoin.

In a note to clients on Tuesday, Hougan forecasted that the inflows from spot Ethereum ETFs would drive ether’s price to new all-time highs exceeding $5,000, though not immediately. He anticipated that the first few weeks following the launch of these ETFs might be volatile for ether, the second-largest cryptocurrency by market capitalization, as funds might flow out of the $11 billion Grayscale Ethereum Trust (ETHE) after it transitions to a spot ETF.

“However, by the end of the year, I’m confident that new highs will be reached. If inflows are stronger than many market analysts expect, the price could be significantly higher,” Hougan stated.

The Securities and Exchange Commission approved eight 19b-4 forms for spot Ethereum ETFs from Bitwise, alongside BlackRock, Fidelity, VanEck, Ark Invest, Invesco, Franklin Templeton, and Grayscale on May 23. However, the issuers still need their S-1 registration statements to become effective before trading can commence, which is expected to happen around July 23, according to sources cited by The Block on Monday.

Impact of ETF Inflows on Ether Versus Bitcoin

Although spot ETFs do not alter the fundamental nature of an asset like ether, they do introduce new sources of demand, Hougan explained.

Since the launch of spot Bitcoin ETFs, including Bitwise’s BITB, a total of 263,965 BTC has been acquired by these funds, compared to 129,281 BTC produced by bitcoin miners — more than double the amount, according to Hougan.

Bitcoin has appreciated approximately 40% since the ETFs were launched on January 11 and over 100% since the market began anticipating their approval in October 2023, Hougan noted, expecting an even greater impact on ether.

Hougan previously predicted that spot Ethereum ETFs would attract $15 billion in net inflows within their first 18 months, a slower pace compared to Bitcoin ETFs, which reached this net inflow milestone in just five months of trading.

However, Hougan believes that the inflow of funds into Ethereum ETFs will have a more pronounced effect on price for three interconnected reasons.

Firstly, Ethereum’s short-term inflation rate has effectively been 0% over the past year, compared to bitcoin’s 1.7% when spot Bitcoin ETFs were launched. “This meant we needed $16 billion of bitcoin buying per year just to maintain the price,” Hougan argued.

Secondly, bitcoin miners generally need to sell the bitcoins they produce to cover high operational costs, while ether stakers do not face such pressures, as their costs in maintaining the proof-of-stake protocol are much lower. “Even if Ethereum’s inflation rate rises above 0%, I do not foresee significant selling pressure from stakers,” he added. “There is simply less forced selling in Ethereum compared to Bitcoin.”

Lastly, ether stakers lock up their assets to earn rewards, effectively taking them “off the market.” Currently, 27.5% of ether is staked, according to data from The Block, with another 13% locked in DeFi smart contracts, meaning around 40% of ether is “somewhat or completely unavailable for sale,” Hougan noted.

Given these dynamics, if the spot Ethereum ETFs attract the level of inflows Hougan anticipates, “it’s hard to imagine ether not challenging its previous record,” he concluded.

At present, ether is trading at $3,477, as per The Block’s ether price page, which is approximately 29% below its all-time high of $4,875 set in November 2021.