Ethereum has the potential to reach $6,500 this year due to increased investment in spot exchange-traded funds (ETFs) approved by the U.S. Securities and Exchange Commission (SEC). This is according to Steno Research’s report on Thursday. These ETFs are expected to attract between $15 billion and $20 billion in inflows within the year, leading to a surge in ether’s price.
The upcoming availability of spot ETFs for trading in the U.S. has generated optimism, with reports suggesting that trading could begin following SEC approvals. Analysts predict that despite outflows from the Grayscale Ethereum Trust (ETHE), the overall influx of capital will significantly enhance ether’s value compared to both the U.S. Dollar and Bitcoin.
According to Steno’s research, the ether/bitcoin ratio could strengthen to 0.065 later this year if the estimated inflows materialize.
Since the news of potential approvals for spot Ethereum ETFs broke out, Ethereum’s price has surged over 24% in the past week alone. A significant increase in trading volume has also accompanied this spike.
Comparison with Bitcoin ETFs
Stenos’ outlook contrasts with cautious estimates from other experts. Galaxy Research anticipates that spot ether ETFs could attract $5 billion in net inflows within five months, while Bitwise, an asset manager, projects $15 billion within the initial 18 months. The significant differences in these forecasts highlight the market dynamics and investor sentiments surrounding ether.
A smaller inflow into ether ETFs compared to bitcoin ETFs will have a greater impact on ether due to its lower market capitalization and substantially poorer liquidity. As a result, inflows into ETH spot ETFS are more likely to surprise the upside than the downside.
Steno’s research
The SEC’s approval of eight spot Ethereum ETFs on May 23, 2024, marked a significant milestone for the crypto industry. The green light given to submissions from players like VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares Invesco Galaxy, and Bitwise paves the way for these investment products to be listed and traded on top regulated exchanges.
Significance of the SEC’s approval
The approval of spot ETFs represents a step in gaining regulatory acknowledgment and incorporating cryptocurrencies into mainstream finance. This decision is anticipated to increase trust in cryptocurrencies, foster innovation, and encourage the creation of more financial offerings. It also aims to attract significant investment from institutions, which will help solidify Ethereums position as a valuable asset.
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James Seyffart, an ETF analyst at Bloomberg, highlighted that the SEC’s endorsement of Ether trusts implicitly acknowledges Ether as a commodity. This regulatory clarity is anticipated to open the doors for investments in spot ETFs. Seyffart predicts that these ETFs could attract around 20% of the investments that spot Bitcoin ETFs have attracted, initially amounting to an investment of $2.66 billion.
Ethereum’s journey to $6.5K
The approval of spot Ethereum ETFs is expected to result in significant investments that will push the price of ether. Analysts believe that the blend of regulatory approval and Ethereum’s inherent qualities will catch the eye of investors. Additionally, with the upcoming upgrades in Ethereum 2.0 improving network scalability and transaction efficiency, ether is poised to become a more appealing investment option.
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Ethereum’s shift towards a proof-of-stake consensus mechanism as part of Ethereum 2.0 is foreseen to enhance network security and provide staking rewards, making it more attractive for investors. Despite some ETF issuers excluding staking from their plans to secure regulatory approval, the overall effects of Ethereum 2.0 upgrades are likely to strengthen investor trust and contribute to increased liquidity and decreased volatility for ether.
Cryptopolitan Reporting by Florence Muchai
