Key Points
- Ethereum ETFs debut on major stock exchanges, with potential impact on future ETH prices.
- The success of Bitcoin ETFs offers insights into possible effects on Ethereum prices.
Ethereum ETFs have now been launched on significant stock exchanges.
This article examines the potential inflow for these ETFs and their possible influence on the future price of ETH.
Bitcoin ETF Inflows and Ethereum Implications
Bitcoin ETFs have seen substantial inflows, setting high expectations for Ethereum ETFs.
Bitcoin ETFs have garnered significant investor interest since their inception, with a net inflow of $16.67 billion over approximately six months.
Ethereum, despite being the second-largest cryptocurrency, is often viewed differently from Bitcoin, which is seen as a store of value or “digital gold”.
This distinction, coupled with Bitcoin’s more established market position, suggests that Ethereum may not draw the same level of ETF inflows as Bitcoin.
Bloomberg’s senior ETF analyst, Eric Balchunas, has provided conservative estimates for Ethereum ETF inflows, predicting these funds will attract only 10-15% of the inflows seen by Bitcoin ETFs.
When examining the derivatives market, Ethereum’s open interest for futures and options on the CME is approximately $1.67 billion, while Bitcoin’s open interest is $12.56 billion.
ETF Effects on Market Prices
One often asks, why would ETF inflows impact the price of an underlying asset, such as Ethereum?
Several academic studies have confirmed that ETFs significantly influence underlying asset prices.
Research by Ben-David et al. (2018) demonstrates that ETFs can lead to increased volatility and price deviations from fundamental values in the securities they track.
Further evidence from Luca J. Liebi’s literature review highlights ETFs’ role in improving market liquidity and price efficiency under normal conditions.
Empirical evidence suggests that ETFs, especially those with high leverage, can magnify price changes in underlying assets due to their rebalancing activities.
These studies collectively indicate that ETF inflows tend to push up the prices of the assets they track, lending credence to the hypothesis that Ethereum ETFs could similarly impact ETH prices.
Based on the above analysis, four potential scenarios for Ethereum ETF inflows emerge, with projections estimating the potential inflows Ethereum ETFs might experience by the end of 2024, using the $16.668 billion figure for Bitcoin as a baseline.
To estimate the price impact of these potential inflows, four multipliers are considered: 0.5x, 1x, 1.5x, and 2x.
These multipliers reflect varying degrees of price sensitivity to ETF inflows.
Assuming a current Ethereum price of $3,400, the estimated price impact by the end of 2024, solely from ETF inflows, would range from $170 to $1,700.
With more likely multipliers (1x to 1.5x), the price increase would be between $340 and $1,275.
This suggests a potential Ethereum price range of $3,740 to $4,675.
Please note that this article does not represent investment advice. The content and materials featured are for educational purposes only.
