Here's How ETH Could Surpass $5,000 in 2024 After Ethereum ETP Approvals: Bitwise CIO

Bitwise Asset Management’s chief investment officer has predicted that the introduction of ethereum exchange-traded products (ETPs) will drive Ether (eth) prices to new all-time highs above $5,000 by the end of the year.

CIO suggests ETP flows could have a bigger impact on ethereum than bitcoin.

The Road to ethereum's New All-Time High

According to Matt Hougan, with ETPs projected to attract $15 billion in new assets over the next 18 months and eth currently trading at around $3,400, just 29% below its all-time high, conditions are perfect for a price rally.

The projected rise in the price of ethereum depends on the fundamental principles of supply and demand. While ETPs do not alter the underlying fundamentals of eth, they do introduce new sources of demand. This dynamic was observed with btc following the launch of bitcoin spot ETFs in January.

Since then, these financial vehicles have more than doubled the amount of bitcoin that miners have produced, leading to a noticeable increase in prices. bitcoin is up about 25% since the ETP launched and over 110% since the market began considering the potential products in October 2023.

However, Matt ethereum-etps-and-the-path-to-a-new-all-time-high” data-wpel-link=”external” target=”_blank”>warned The CIO said the first few weeks after the ETP launch could see some volatility. This could happen because the $11 billion Grayscale ethereum Trust (ETHE) is switching to an ETP, which could cause short-term selling. Despite this, the CIO is confident that by the end of the year, eth will reach new all-time highs, with even bigger gains possible if more money flows in than expected.

ethereum ETP gains could outweigh bitcoin's

Several factors suggest that ethereum could see even larger gains from ETP inflows than bitcoin. When bitcoin ETPs were launched, the asset's inflation rate was 1.7%, requiring $16 billion in annual btc purchases to maintain equilibrium.

ethereum’s inflation rate over the past year has been 0%, with the eth supply remaining at 120 million. This balance is due to the consumption of eth by various ethereum-based applications, which balances the daily creation of new eth. As new demand does not meet new supply, the potential for price appreciation is high. Furthermore, increased activity on the ethereum network would further increase the organic demand for eth.

Another advantage of ethereum is its “proof-of-stake” consensus mechanism. Unlike bitcoin miners, who often need to sell their newly mined btc to cover operational costs, ethereum participants do not face high direct costs and are not forced to sell their rewards. This reduces the daily forced selling pressure on eth, creating a more favorable supply-demand balance.

Currently, 28% of all eth is staked and thus locked in contracts for a set period, making it unavailable for sale. An additional 13% is locked in decentralized finance smart contracts, reducing the available supply. Approximately 40% of eth is effectively off the market, which could amplify the impact of new demand from ETP inflows.

<!– ai CONTENT END 1 –>