ETH’s Road to $5,000: Near-Term Catalysts and Medium-Term Outlook

Author: Teng yan, former analyst at Delphi Digital; Compiler: 0xxz@黄金财经

This month, the cryptocurrency market has experienced a big drop. Many investors have panicked and reduced the risk of their portfolios faster than you can say "HODL". Panic is high and sentiment has hit rock bottom.

Last week, BTC fell below $54,000 and ETH fell below $2,850.

That's why now is the best time to firmly support long ETH.

Near-term catalysts

• The spot ETH ETF is expected to launch around July 15, less than a week from now. Given the massive sell-off we saw before, it is reasonable to expect that this news will trigger a rebound. The initial spot ETF flows are anyone's guess, but I believe they will exceed expectations within 12 months.

• I think the most compelling reason for inflows is that TradFi investors who have already allocated to the BTC ETF will also diversify by purchasing ETH. This move allows them to capture a broader part of the cryptocurrency market (digital gold + technology platform) while reducing the risk of a single asset. "Diversification" is a word many investors like.

• ETHE outflows may be limited. Currently, it is trading at NAV, so investors who want to exit can do so without waiting for the ETF to launch. In addition, Grayscale announced that it will distribute shares of its new Ethereum Mini Trust Fund, which has lower fees, to existing ETHE holders on July 18.
  

German Government BTC Balance. They have been selling on the market Source: Arkham

• Crypto markets, including ETH, are being weighed down by the German government selling BTC and the Mt. Gox payout. While some of these concerns are justified as actual funds are leaving, this issue is unique and should be addressed sooner rather than later. Germany, in particular, has been blitzing the market and currently has less than $1 billion of BTC left to sell, which is $3 billion lower than last month.

Current Market State

• ETH perpetual futures open interest (OI) has returned to pre-ETH levels. While this may not be terribly significant due to overall position changes, it suggests a general lack of interest or attention, leaving more potential upside.
  

Source: Kaito AI

• Despite the upcoming ETF, sentiment on ETH is at its lowest point. This gives a sense of the state of the market.
  

• Many OTC investors and traders (e.g. Jason Choi/Tangent, Andrew Kang/Mechanism) have laid out arguments for why we are at a bear market inflection point. This may be true, but no one knows the exact answer. If the price starts to rise significantly, they will have to buy back in.

Medium-term Outlook

Source: FedWatch

• An improvement in the macro environment is also on the horizon. We are entering a rate-cutting cycle, with the market pricing in a 73% chance of a September cut. Citi analysts predict that rates could fall by 200 basis points by 2025. We appear to be on track for a soft landing.

• FTX creditors are expected to recover $14-16 billion in cash by the end of the year. These people are crypto natives, so it stands to reason that they might use some of that to buy crypto (h/t @wintermute_t).

• There’s also a good chance that Trump wins the election, which could mean a better regulatory outlook for crypto. And Gensler is no longer SEC chairman.

I’m Bullish on ETH

There are good reasons to be bullish on ETH in the near to medium term.

I’m not alone in this thought:

I haven’t even touched on the technology yet - let’s assume we all agree that Ethereum is the key factor in the success or failure of the crypto industry. The basic assumption is that ETH is the best technology bet in the tokenized world.

"If you want to invest in the development of tokenization, Ethereum is the way to go. It is the foundation of all tokenization." - Matt Hougan, CIO of Bitwise

One thing is certain: it will not be a straight road.

The market remains nervous and needs to regain confidence after last week's shock. With the summer vacation approaching, big capital may not be ready to buy until August.