Will an Ethereum ETF push up the price of ETH?

Author: Dilin Massand Source: unchainedcrypto Translation: Shan Ouba, Golden Finance

During a recent budget hearing, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler told senators that the approval of a U.S. spot Ethereum ETF should be completed by the end of summer. So, how does the market see Ethereum's price trend before and after this?

When the U.S. Securities and Exchange Commission approved the 19b-4 forms for eight different spot Ethereum exchange-traded funds (ETFs), the price of Ethereum soared nearly 20% in a few hours.

Now, ETF applicants are submitting their S-1 registration forms, which require approval from securities regulators before they can start trading on exchanges. Gensler told the Senate Appropriations Committee on Thursday that the process is expected to be completed by the end of summer.

Gensler said the registrations are being reviewed at a “staff level” and remain up to the issuer and how responsive they are to any comments. With the decision in the hands of the ETF issuers, how does the market view Ethereum’s price direction before and after this?

Investment management firm VanEck’s spot Ethereum ETF application was one of eight approved on Form 19b-4, and they recently raised their 2030 Ethereum price target to $22,000. But Katie Talati, head of research at crypto asset management firm Arca, said in an email to Unchained that recently “Ethereum has had a harder time building a strong narrative than other first-layer solutions and the rise of second-layer solutions.”

Ethereum Short-Term Price Prediction (Pre-Live)

In the short term, this lack of narrative could give Ethereum some lift — though probably not to $22,000 — as traders were positioned lower on the asset when the approval announcement was made.

Coinbase Institutional’s head of trading desk David Duong said in an email that “Coinbase Institutional has seen an increase in buying in Ethereum since the 19b-4 approval.” He said: “This is not as aggressive as we saw before the launch of the spot Bitcoin ETF in the U.S. This makes us think that the market is still under-positioned.”

For Bitcoin, it was a "buy the rumor, sell the news" event because there was a lot of speculation before the Bitcoin ETF was approved in January. In the case of Ethereum, Glen Goodman (author of the book "Crypto Trader") said in an email to Unchained that "traders did not sell the news - they bought it" because the approval was unexpected.

Investors still need to be cautious. Katie Stockton's Fairlead Strategies pointed out in a report on June 10 that since the news of the spot Ethereum ETF, Ethereum has given up some of its outstanding performance relative to Bitcoin. Analysts expect Bitcoin to continue to outperform Ethereum in the short term, with their weekly MACD and stochastics analysis for Ethereum being neutral, adding that they will take a bullish stance once Ethereum breaks above the $3,925 resistance level on a consecutive weekly close basis.

Ethereum Long-Term Price Prediction (Post-Publication)

After experiencing a pullback following the ETF approval, “Bitcoin rallied from $39,201 to $67,339, ultimately setting a new all-time high in March 2024, a gain of 72%,” said Teddy Fusaro, president of Bitwise, which launched a spot Bitcoin ETF in the United States.

If that happens, Ethereum would need to rise more than 35% from its current price to reach its November 2021 all-time high of $4,867, Fusaro said.

While that may be plausible, Arca’s Katie Talati doesn’t think a spot Ethereum ETF would have a substantial long-term impact on Ethereum prices because institutional demand isn’t as high as it is for Bitcoin.

In a previous interview with Unchained, Ophelia Snyder, co-founder and president of crypto ETP provider 21Shares, which manages the 21Shares Ethereum Staking ETP (AETH) in Europe and a spot Bitcoin ETF (ARKB) in the U.S., mentioned that institutional understanding of Ethereum is far less than that of Bitcoin.

Talati also noted that "Grayscale Ethereum Trust, which manages $10 billion in assets, may also experience sustained outflows, creating daily selling pressure in the Ethereum market."

A similar view was expressed in a recent report from crypto research firm Kaiko. "Once the Ethereum ETF is launched, it is expected that Grayscale's ETHE will experience selling pressure due to possible outflows or redemptions. ETHE has traded at a discount of between 6% and 26% over the past three months."

Nevertheless, Vetle Lunde, a senior analyst at crypto research firm K33, predicted in a recent report that the U.S. spot Ethereum ETF will attract $4 billion in net inflows in the first five months after its launch. In a message to Unchained, Vetle explained that he expects about 20% of the $4 billion to come from institutional investors, who are expected to have assets under management of $700 million to $800 million. While some have questioned whether the lack of collateral in Ethereum ETFs will limit investor interest in the funds due to the lack of APY (annual percentage yield), Lunde does not see this as a problem, writing: "99.1% of AUM in Canadian Ethereum ETFs is held in non-collateralized products, while 97.9% of AUM in Europe is held in non-collateralized ETPs. This suggests that collateralization is not a major issue among ETP investors." In April, the Hong Kong Securities and Futures Commission approved the trading of a spot Ethereum ETF alongside a Bitcoin ETF. Using the Hong Kong market as a reference, Noelle Acheson, author and economist of Crypto Is Macro Now, wrote in a recent newsletter, "When/if an Ethereum spot ETF is finally launched, we should be prepared for a poor reaction." Acheson's prediction is based on the fact that Ethereum has accounted for less than 15% of total spot crypto ETF AUM since these securities began trading in Hong Kong.

Pranav Kanade, portfolio manager of VanEck’s Digital Asset Alpha Fund, also believes that interest in a spot Ethereum ETF may not explode as much as Bitcoin, writing in an email to Unchained that “the Bitcoin narrative fits perfectly in the U.S. in particular… while there is no such astrology for an Ethereum ETF.”

Nevertheless, Kanade said their bullish forecast for Ethereum in 2030 assumes that an ETF will serve as a catalyst for further attention to the Ethereum network and its various applications, such as stablecoins and other tokenized financial assets. “This in turn will drive increased activity on Ethereum or its second-layer solutions, resulting in more Ethereum being destroyed and the total supply being reduced,” Kanade said.