Cryptocurrencies

says Andrew Kang, founder and partner at venture capital firm Mechanism Capital

Ethereum (ETH) could fall to $2,400 after the launch of Ethereum spot exchange-traded funds, says Andrew Kang, founder and partner at cryptocurrency-focused venture capital firm Mechanism Capital.

Ether is currently trading at $3,410, according to CoinGecko. A drop to $2,400 would represent a roughly 30% drop from its current price.

In a June 23 article, Kang said that unlike Bitcoin, Ethereum attracts less institutional interest, there is little incentive to convert spot Ethereum into an ETF form, and the cash flow of network have not been very impressive.

“How much upside potential can an ETH ETF offer? “I won’t argue too much,” Kang said, adding:

“After the ETF launches, I expect the price to be between $2,400 and $3,000.”

The expected price could be a major setback for the asset, given that Ethereum had already reached over $4,000 in March when Bitcoin hit a new all-time high. It almost reached the same level again a few days before the SEC approved Ethereum ETFs.

Flows linked to Bitcoin ETFs will be low

Kang estimates that Ethereum ETFs attract 15% of the inflows seen by Bitcoin (BTC) ETFs, which is within the 10-20% range estimated by Bloomberg ETF analysts Eric Balchunas and James Seyfart.

Kang noted that only $5 billion in new money, excluding funds transferred from the spot model, flowed into spot bitcoin ETFs in the first six months.

Extrapolating this data to Ethereum suggests that Ethereum ETFs are receiving $840 million in “real” inflows over the same period.

Source: Andrew Kang

“I think the expectations of crypto citizens are exaggerated and disconnected from the actual preferences of trading professionals,” Kang said.

“This means ETFs are overvalued.”

Not everyone agrees with Kang’s price predictions. Industry analyst Patrick Scott (known as Dynamo DeFi) recently told Cointelegraph that he “expects a similar directional movement” to the performance of Bitcoin ETFs. However, he does not see the price of ether doubling.

Meanwhile, asset management firm Van Eck believes that Ethereum ETFs could help push Ethereum to $22,000 by 2030.

Tech stocks are overvalued

Introducing Ethereum to investors as a decentralized financial settlement layer, world computer or Web3 app store might carry some weight — but it’s a “tough sell” when you look at the data, Kang said.

Ethereum’s future as a cash flow “machine” looked brighter when fees were increased by DeFi and non-fungible tokens during the last cycle – however, that didn’t last, and now Ethereum could look like another overvalued tech stock, he said. :

“With $1.5 billion in 30-day annualized revenue, a PE ratio of 300x, and a negative P/E ratio after inflation, how would analysts justify this price to their father’s family office or the head of their macro funds?

There is no such thing as a hard sell

The surprise approval also means issuers have less time to make marketing pitches to institutional investors, although Bitwise and VanEck are among the few approved Ethereum ETF candidates that have already made Ethereum-themed announcements, Kang said.

Kang added that removing staking from the proposed Ethereum spot ETFs could also prevent investors from converting their Ethereum spot into an ETF form.

about: Asset managers update proposals for Ethereum ETFs, ahead of July launch

Kang acknowledged that BlackRock and other financial institutions have started taking steps to tokenize real-world assets on Ethereum – however, he is unsure to what extent this will impact Ethereum’s price.

The CEO of Mechanism Capital believes that the ETH/BTC price ratio could increase from 0.054 at current prices to 0.035 over the next 12 months.

However, Kang believes that a rise in Bitcoin’s price to $100,000 over the next six to nine months could “drag” ether to a new all-time high in the process.

review: Polygon never planned to beat Ethereum: Anurag Arjun, X Hall of Flame

Leave a Reply

Your email address will not be published. Required fields are marked *