Bitwise: Ethereum spot ETF will push ETH beyond $5,000

ETF issuer Bitwise's founder Matt Hougan stated that the launch of an Ethereum spot ETF will drive up the price of Ether and break its all-time high, with a chance to exceed $5,000 by the end of the year.

The fees for the Ethereum spot ETF are now public, and it is expected to officially launch on 7/23.

Viewing from the Supply and Demand Perspective

Hougan believes that the best way to assess the potential impact of introducing ETP ETPs as Exchange-Traded Products, with ETFs being one of the fund categories, on commodity prices is to consider the supply-demand relationship. ETPs do not alter the fundamentals of underlying commodities like ETH, but they do introduce new sources of demand.

Consider the price changes of Bitcoin since the introduction of a Bitcoin Spot ETF in January. Since that day, the amount of Bitcoin purchased by Bitcoin ETFs is more than double the amount of Bitcoin that miners can produce:

• BTC Purchased by ETFs: 263,965 BTC
• BTC Produced by Miners: 129,181 BTC

Since the launch of the Bitcoin Spot ETF on January 11, BTC has risen by about 25%, and it has increased over 110% since the market started pricing in October 2023.

Previously, Hougan speculated that an Ethereum Spot ETF would attract $15 billion in inflows within 18 months of listing. Due to three structural reasons, funds flowing into Ethereum ETPs will have a greater impact on Ether.

Bitwise: Ethereum Spot ETF to attract $15 billion in inflows

Lower Short-Term Inflation Rate of ETH

When the Bitcoin ETP was introduced, the inflation rate of the Bitcoin network was 1.7%. In contrast, Ethereum has had a 0% inflation rate over the past year. This is because while a small amount of ETH is generated daily, it is balanced by the consumption of ETH through the use of Ethereum, resulting in a net zero inflation rate over the past year.

Unlike BTC miners, ETH stakers do not need to sell

The second key distinction is that Bitcoin miners typically need to sell the BTC they receive, while Ethereum stakers do not.

Ethereum relies on staking rather than mining, using a Proof of Stake (PoS) system where users stake ETH to ensure accurate and honest transaction processing. In return for correctly processing transactions, stakers receive new ETH rewards. Since staking does not have significant direct costs, there is no need to sell to balance operational costs.

28% of ETH is staked, thus exiting the market

Staking has another impact: when you stake ETH, you lock it in a contract for a period, during which it cannot be withdrawn and sold. Currently, 28% of ETH is staked, effectively removing it from the market.

Additionally, another 13% of ETH is locked in decentralized finance smart contracts—such as collateral in the lending market—further reducing the available ETH in the market.

Combining these, approximately 40% of ETH is not readily available for sale to some extent.

ETH has the potential to challenge $5,000 by the end of the year

Based on the above reasoning, Bitwise expects the new Ethereum Spot ETF to drive ETH's trajectory post-listing. While it may be volatile in the initial weeks, with potential outflows as the $11 billion Grayscale Ethereum Trust ETHE transitions to an ETF, by the year's end, new highs are expected, and ETH could surpass $5,000.