Bitwise CIO predicts Ethereum ETF inflows will push ether prices to all-time highs above $5,000

Matt Hougan, Chief Investment Officer at crypto asset manager Bitwise, said spot Ethereum exchange-traded fund inflows could have a bigger impact on ether upon launch than the equivalent products did for bitcoin.

In a note to clients on Tuesday, Hougan predicted spot Ethereum ETF inflows would push the price of ether to all-time highs above $5,000, though not immediately. He said he expected the first few weeks once the Ethereum ETFs go live to be “choppy” for the second largest cryptocurrency by market cap as funds potentially flow out of the $11 billion Grayscale Ethereum Trust (ETHE) after its conversion to a spot ETF.

“But by year-end, I’m confident the new highs will be in. And if flows are stronger than many market commentators expect, the price could be much higher still,” Hougan said.

The Securities and Exchange Commission approved eight 19b-4 forms for spot Ethereum ETFs from Bitwise, alongside BlackRock, Fidelity, VanEck, 21Shares, Invesco, Franklin Templeton and Grayscale on May 23. However, the issuers still need to have their S-1 registration statements become effective before trading can begin, likely on July 23, sources told The Block on Monday.

ETF flows impact on ether compared to bitcoin

While the spot ETFs don’t change the fundamentals of an underlying asset like ether, they do bring new sources of demand, Hougan said.

Since the spot Bitcoin ETFs launched, including Bitwise’s BITB, 263,965 BTC has been purchased in total by the funds, compared to 129,281 BTC produced by bitcoin miners — more than double, according to Hougan.

Bitcoin has risen around 40% since the ETFs launch on Jan. 11 and more than 100% since the market started pricing in their approval in October 2023, Hougan said, expecting the impact on ether to be bigger.

The Bitwise CIO previously predicted that spot Ethereum ETFs would attract $15 billion of net inflows in their first 18 months. This is a slower pace than the Bitcoin ETFs, which reached that net inflow milestone after just five months of trading.

However, Hougan said he expects the money flowing into Ethereum ETFs to have a bigger impact on price for three related reasons.

Ethereum’s short-term inflation rate has been effectively 0% over the past year, according to Hougan, compared to 1.7% for bitcoin when the spot Bitcoin ETFs launched. “That meant we needed $16 billion of bitcoin buying per year just to tread water,” Hougan argued.

Bitcoin miners generally need to sell the new bitcoins they produce to cover extensive operational costs, Hougan said, while ether stakers do not, with far lower direct costs in securing the proof-of-stake protocol. “Even if Ethereum’s inflation rate rises above 0%, I do not expect significant selling pressure from stakers,” he added. “There is simply less forced selling each day in Ethereum than in Bitcoin.”

Finally, as ether stakers lock up their assets to earn rewards, it is effectively “off the market,” Hougan said. The amount of ether staked as a proportion of supply is currently 27.5%, according to The Block’s data dashboard.

With another 13% locked in DeFi smart contracts, around 40% of ether is “somewhat or completely unavailable for sale,” Hougan argued.

If the spot Ethereum ETFs are successful, seeing the level of inflows the Bitwise CIO anticipates, given these dynamics, “it’s hard to imagine ether not challenging its old record,” he said.

Ether is currently trading for $3,477, according to The Block's ether price page, down around 29% from an all-time high of $4,875 set in November 2021.