Ethereum Could Drop to $2,400 Post ETF Launch, Predicts Mechanism Capital Co-founder
Summary:
Andrew Kang, founder of Mechanism Capital, predicts that Ether (ETH) could possibly drop to as low as $2,400 following the launch of spot Ether exchange-traded funds (ETFs). Kang bases this potential fall on decreased institutional interest in Ether, a lack of incentives for converting spot Ether into ETFs, and poor network cash flows. Despite differing opinions on Ethereum's future performance, Kang suggests that the launch of Ethereum ETFs combined with minimal marketing towards institutional investors and the removal of staking from spot Ether ETFs could negatively impact Ether's price, potentially dipping the ETH/BTC ratio to as low as 0.035 in the next year.
As per Andrew Kang, a prominent crypto-capital venture firm, Mechanism Capital's founder and partner, Ether (ETH) likelihood of a slump down to approximately $2,400 after the introduction of spot Ether exchange-traded funds can't be overlooked. Presently, the trading value of Ether rests at $3,410 according to CoinGecko, implying a potential fall close to 30% from current levels. Kang expressed concerns in his June 23 post, highlighting Ether's less-than-overwhelming institutional appeal, the absence of adequate incentives to transition spot Ether into ETFs, and disappointing network cash flows. "The benefits an ETH ETF may offer could be minimal," Kang asserts, predicting a post-ETF launch price range of $2,400-$3,000. The anticipated rate could prove quite the setback for Ether, given its record high of over $4,000 in March, almost equalled days before Ether ETFs approval by the SEC. Kang foresees 15% of the spot Bitcoin (BTC) ETF flows being drawn to spot Ether ETFs — aligning with Bloomberg ETF analysts’ predictions of a 10-20% range. He observed that the initial six months saw $5 billion in new funding, discounting the spot converted funds, inflow into spot Bitcoin ETFs. This data forecasts the potential intake of $840 million for spot Ether ETFs within the same time frame. Source: Andrew Kang. Kang anticipates overexaggerated expectations from crypto natives, disconnected from traditional finance allocators' preferences. He believes the ETF is "more than priced in." However, the industry analyst Patrick Scott (alternatively known as Dynamo DeFi) and asset management firm Van Eck dispute Kang's price forecast. Although Scott doesn’t envision Ether’s price doubling, he predicts a parallel course to spot Bitcoin ETFs. Van Eck, on the other hand, is optimistic that Ether could reach $22,000 by 2030, aided by spot Ether ETFs. Kang contends Ethereum's appeal as a decentralized financial settlement layer, world computer or Web3 app store may carry credence but seems to falter upon analysis of the data. He likens Ethereum to another overvalued tech stock with its dwindling promise as a cash flow churner seen in the previous DeFi and NFT cycles. He even goes ahead to question Ethereum's price justification given its annualized revenue of $1.5B, 300x PS ratio accompanied by negative earnings/PE ratio post-inflation. Furthermore, Kang suggests that the rapid approval of Ethereum ETFs gives the issuers less marketing time to woo institutional investors. He also hints at the possibility of the removal of staking from spot Ether ETFs dissuading investors from converting their spot Ether into ETF form. Despite recognising BlackRock and other financial institutions' foray into Ethereum's real-world asset tokenization, Kang remains unsure about how impactful this will be on Ether's price, predicting a possible dip in the ETH/BTC price ratio from the current 0.054 to around 0.035 in the subsequent year. Kang does not completely rule out an Ether price surge, should Bitcoin rally to a staggering $100,000 within the next six to nine months.
Published At
6/24/2024 8:15:57 AM
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