Ether Could Plummet to $2,400 Following Launch of Spot Ether ETFs, Warns Crypto VC Founder

The price of Ether could experience a significant drop to as low as $2,400 following the launch of spot Ether exchange-traded funds (ETFs), representing a nearly 30% fall from its current price.

Andrew Kang, a founder and partner at Mechanism Capital, a crypto-focused venture capital firm, shared his insights in a post on X, highlighting the differences between Bitcoin and Ether in terms of institutional interest and network cash flows.

According to Kang, Ether attracts less institutional interest compared to Bitcoin, and there are limited incentives for converting spot Ether into ETF form.

“How much upside would an ETH ETF Provide? I would argue not much.” Kang further adds, “After the ETF launch my expectation is $2,400 to $3,000.”

https://t.co/On2KWjAlLx

— Andrew Kang (@Rewkang) June 23, 2024

Ether ETFs to See 15% of Flows Seen by Bitcoin Funds

If Kang’s prediction holds true, it would mark a significant backtrack for Ether, considering it reached over $4,000 in March during Bitcoin’s new all-time high.

The price almost reached that level again shortly before the SEC approved Ether ETFs.

In terms of flows relative to spot Bitcoin ETFs, Kang expects spot Ether ETFs to attract around 15% of the flows seen by spot Bitcoin ETFs.

This estimation aligns with the range estimated by Bloomberg ETF analysts Eric Balchunas and James Seyffart, who suggest that spot Ether ETFs may attract 10-20% of the flows.

Kang extrapolates this data to Ethereum, suggesting that spot Ether ETFs could receive approximately $840 million in “true” inflows over the same timeframe.

In his post, Kang also questioned Ethereum’s value proposition as a decentralized financial settlement layer, a world computer, or a Web3 app store, arguing that the data does not support the claims.

He suggested that Ethereum’s future as a cash flow “machine” looked promising during the previous cycle’s decentralized finance and non-fungible token surges, but that momentum has not continued.

Kang raises concerns about the high valuation of Ethereum, comparing it to an overpriced tech stock.

The surprise approval of spot Ether ETFs may limit the time for issuers to market their products to institutional investors.

Kang further pointed out that the absence of staking in the proposed ETFs may deter investors from converting their spot Ether holdings into ETF form.

the most important part of your thesis is highlighting how $ETH is used efficiently

why would anyone smart buy a spot eth etf with no yield instead of staking spot ethereum directly or with an institutional custodian

only dumb money would do that

— Ansem 🧸💵 (@blknoiz06) June 23, 2024

Ethereum ETF Providers Update Fee and Investment Details

Several prominent asset managers have submitted revised proposals for Ethereum ETFs to the SEC.

The filings by VanEck, BlackRock, Grayscale, Invesco Galaxy Digital, and Fidelity aim to provide updated information on their respective Ethereum funds, Eric Balchunas, an analyst at Bloomberg, noted.

VanEck’s filing disclosed a management fee of 0.20% for its Ethereum fund, which is in line with competitors like Franklin Templeton, charging 0.19% in management fees.

On the other hand, BlackRock has not yet announced the fee structure for its iShares Ethereum Trust (ETHA).

Balchunas suggested that VanEck’s fee announcement puts pressure on BlackRock to keep their management fees below 30 basis points (0.30%) at the very least.