The ETH ETF - What to expect?
Spent some time doing a little scenario analysis on what we could expect to ETH price when its spot ETF start trading.
Here's my full analysis:
1. Expected inflows into the ETF
It is not an easy task to estimate with precision the potential inflows into the ETH ETFs. So here, I decided to rely on the predictions from various experts to try and come up with a range of expected value. And this is what I got:
-Goldman Sach: They expect the new spot ethereum ETFs to attract a modest $1 billion-$3 billion or so of net inflows for the remainder of the year.
Source:
-Bloomberg: @EricBalchunas (Senior ETF Analyst) expect that ETH could capture around 15–20% of the inflows seen with BTC ETFs.
Source:
-Bitwise: @Matt_Hougan (CIO) thinks that the ETH ETFs could see net inflows of between 25% to 50% of those of the BTC ETFs in the first four months of trading.
Source:
-Grayscale: Research team expects that the spot ETH ETFs will see roughly 25%-30% of the demand of the BTC ETFs.
Source:
Based on that, I derived a bear, base, and bull estimate for the potential inflow into the ETH ETF for the end of 2024.
Now comes the million-dollar question: How can we estimate the price impact of these potential inflows for ETH?
Again, there is no easy way to do this, but one option could be to draw some assumptions based on the recent spot Bitcoin ETF.
2. BTC price reaction to the spot ETF
A lot of factors move the market. But ultimately, a price will move based on two forces: demand and supply. Hence, it seems reasonable to assume that the surge in marginal demand arising from the new BTC ETFs has had a significant impact on Bitcoin's price, especially considering the limited and known supply of Bitcoin.
So for this study, I assumed that roughly 75% of Bitcoin recent price action could be explained by the ETF net inflows only.
This implies that a net inflow of ~$13.86B has moved BTC by approximately +37.5%.
In other words, every billion in net inflows into the ETFs is assumed to move BTC by +2.7%.
3. Extrapolating to ETH
However, BTC and ETH are different animal. So if we want to estimate how much ETH could move for each billion dollars in net inflows, we need to take other factors into account:
->BTC FDV is currently ~3.15x that of ETH
-> Around 27% of all ETH is staked.
->ETH supply has, in overall, been deflationary (-0.184%) since the Merge.
Based on this, a reasonable assumption could be that ETH is 4x more reactive than BTC, meaning that for the same inflow, ETH will move four times as much as BTC.
This would mean that every billion dollars in net inflows could move ETH by +10.8%.
4. Wrapping it up - Scenario analysis
Given all of this, we can derive different estimate on the price performance of ETH by the end of 2024:
->Bear case: ETH at $4,428 by end of year
->Base case: ETH at $5,294 by end of year
->Bull case: ETH at $6,730 by end of year
5. Some things to keep in mind
-This is only a short analysis with a lot of shortfall and strong assumption. It should only serve as a reference point.
-Significant outflows from Grayscale Ethereum Trust to the new ETF are expected due to the ETF’s higher liquidity, narrower spreads, and lower fees. This can impact price and volatility, or at least in the short term.
-There is no staking available for the ETFs for now. This should evolve in the future (which would be a positive element).
-Unlike Bitcoin, which is clearly marketed as “digital gold,” Ethereum’s value proposition may be a bit harder to convey to retail investors. This can have a negative impact on the initial ETFs hype. But over time, I think it would be seen as the world biggest decentralized computer network (the mother of all tech stocks).thedalesreport.com/crypto-nfts/jp…
grayscale.com/research/repor…
Spent some time doing a little scenario analysis on what we could expect to ETH price when its spot ETF start trading.
Here's my full analysis:
1. Expected inflows into the ETF
It is not an easy task to estimate with precision the potential inflows into the ETH ETFs. So here, I decided to rely on the predictions from various experts to try and come up with a range of expected value. And this is what I got:
-Goldman Sach: They expect the new spot ethereum ETFs to attract a modest $1 billion-$3 billion or so of net inflows for the remainder of the year.
Source:
-Bloomberg: @EricBalchunas (Senior ETF Analyst) expect that ETH could capture around 15–20% of the inflows seen with BTC ETFs.
Source:
-Bitwise: @Matt_Hougan (CIO) thinks that the ETH ETFs could see net inflows of between 25% to 50% of those of the BTC ETFs in the first four months of trading.
Source:
-Grayscale: Research team expects that the spot ETH ETFs will see roughly 25%-30% of the demand of the BTC ETFs.
Source:
Based on that, I derived a bear, base, and bull estimate for the potential inflow into the ETH ETF for the end of 2024.
Now comes the million-dollar question: How can we estimate the price impact of these potential inflows for ETH?
Again, there is no easy way to do this, but one option could be to draw some assumptions based on the recent spot Bitcoin ETF.
2. BTC price reaction to the spot ETF
A lot of factors move the market. But ultimately, a price will move based on two forces: demand and supply. Hence, it seems reasonable to assume that the surge in marginal demand arising from the new BTC ETFs has had a significant impact on Bitcoin's price, especially considering the limited and known supply of Bitcoin.
So for this study, I assumed that roughly 75% of Bitcoin recent price action could be explained by the ETF net inflows only.
This implies that a net inflow of ~$13.86B has moved BTC by approximately +37.5%.
In other words, every billion in net inflows into the ETFs is assumed to move BTC by +2.7%.
3. Extrapolating to ETH
However, BTC and ETH are different animal. So if we want to estimate how much ETH could move for each billion dollars in net inflows, we need to take other factors into account:
->BTC FDV is currently ~3.15x that of ETH
-> Around 27% of all ETH is staked.
->ETH supply has, in overall, been deflationary (-0.184%) since the Merge.
Based on this, a reasonable assumption could be that ETH is 4x more reactive than BTC, meaning that for the same inflow, ETH will move four times as much as BTC.
This would mean that every billion dollars in net inflows could move ETH by +10.8%.
4. Wrapping it up - Scenario analysis
Given all of this, we can derive different estimate on the price performance of ETH by the end of 2024:
->Bear case: ETH at $4,428 by end of year
->Base case: ETH at $5,294 by end of year
->Bull case: ETH at $6,730 by end of year
5. Some things to keep in mind
-This is only a short analysis with a lot of shortfall and strong assumption. It should only serve as a reference point.
-Significant outflows from Grayscale Ethereum Trust to the new ETF are expected due to the ETF’s higher liquidity, narrower spreads, and lower fees. This can impact price and volatility, or at least in the short term.
-There is no staking available for the ETFs for now. This should evolve in the future (which would be a positive element).
-Unlike Bitcoin, which is clearly marketed as “digital gold,” Ethereum’s value proposition may be a bit harder to convey to retail investors. This can have a negative impact on the initial ETFs hype. But over time, I think it would be seen as the world biggest decentralized computer network (the mother of all tech stocks).thedalesreport.com/crypto-nfts/jp…
https://x.com/EricBalchunas/status/1795777989369561135
https://x.com/BanklessHQ/status/1794087651215024212
grayscale.com/research/repor…
*tipo: it is not Goldman Sachs but JP Morgan
PS: I also share a lot of stuff on this TG channel. Free to join
t.me/alphapleaseupd…
t.me/alphapleaseupd…
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