Andrew Kang, co-founder and partner at crypto venture capital firm Mechanism Capital, believes that the launch of spot Ether (ETH) exchange-traded funds (ETFs) might lead to a significant drop in Ether’s price, potentially falling to $2,400.
According to recent data, Ether is trading at around $3,410, and a decline to $2,400 would represent a nearly 30% decrease.
Kang shared his views on June 23, highlighting that, unlike Bitcoin, Ether has less appeal to institutional investors. He also pointed out that there are limited incentives to convert spot Ether into ETF form, and the network’s financial performance hasn’t been very compelling.
“How much upside would an ETH ETF provide? I would argue not much,” Kang stated, adding that he expects Ether’s price to fall to between $2,400 and $3,000 following the ETF launch. This potential drop comes after Ether had previously surged to over $4,000 in March when Bitcoin reached a new all-time high.
Limited Institutional Interest
Kang suggests that spot Ether ETFs will attract only about 15% of the flows that spot Bitcoin ETFs have seen. This estimate aligns with projections from Bloomberg ETF analysts Eric Balchunas and James Seyffart, who have estimated flows in the 10-20% range for Bitcoin ETFs.
Kang noted that in the first six months, spot Bitcoin ETFs saw $5 billion in new funds, excluding those converted from spot form. Applying this to Ethereum, he anticipates that spot Ether ETFs could see around $840 million in new inflows during the same period.
“I believe that the expectations of crypto natives are overinflated and disconnected from the true preferences of traditional financial allocators,” Kang commented. “This implies that the ETF is more than priced in.”
Mixed Opinions
Not everyone shares Kang’s bearish outlook. Industry analyst Patrick Scott, known as Dynamo DeFi, recently suggested that the price movement of spot Ether ETFs could mirror that of Bitcoin ETFs, though he doesn’t foresee Ether’s price doubling.
In contrast, asset management firm VanEck has a more optimistic view, predicting that spot Ether ETFs could help drive Ether’s price to $22,000 by 2030.
Ethereum’s Value Proposition
Kang argues that while Ethereum is pitched to investors as a decentralized financial settlement layer, a world computer, or a Web3 app store, these concepts are a hard sell when examining the current data. He noted that Ethereum’s potential as a cash flow generator seemed more promising when fees were higher during previous decentralized finance and NFT booms. However, that momentum has not continued, and now Ethereum might appear overvalued.
“At $1.5 billion in 30-day annualized revenue, a 300x price-to-sales ratio, and negative earnings-to-price ratio after inflation, how will analysts justify this price to their bosses?” Kang questioned.
Marketing and Staking Challenges
Kang also mentioned that the sudden approval of spot Ether ETFs gives issuers less time to market these products to institutional investors. Although firms like Bitwise and VanEck have started promoting Ethereum-themed ETFs, the lack of staking options in these proposed ETFs could deter investors from converting their spot Ether into ETF form.
Summary Review: The launch of spot Ether (ETH) exchange-traded funds (ETFs) is generating mixed reactions within the crypto community. Andrew Kang from Mechanism Capital predicts that Ether’s price could drop to as low as $2,400, attributing this to limited institutional interest and lackluster network financial performance. Kang’s bearish outlook contrasts with more optimistic views, such as VanEck’s projection of Ether reaching $22,000 by 2030. The anticipated limited inflows into spot Ether ETFs compared to Bitcoin ETFs and the absence of staking options are seen as potential obstacles to the ETFs’ success. Despite the concerns, the introduction of these ETFs marks a significant step for Ethereum, potentially influencing its adoption and market dynamics in the coming years. The true impact of spot Ether ETFs will unfold as the market reacts and institutional interest evolves.
Disclaimer: Remember that nothing in this article and everything under the responsibility of Web30 News should be interpreted as financial advice. The information provided is for entertainment and educational purposes only. Investing in cryptocurrency involves inherent risks and potential investors should be aware that capital is at risk and returns are never guaranteed. It is imperative that you conduct thorough research and consult with a qualified financial advisor before making any investment decision.
