Ether’s price could potentially drop to $2,400 following the introduction of spot Ether exchange-traded funds (ETFs), according to Andrew Kang, a founder and partner at Mechanism Capital, a crypto-focused venture capital firm. As of now, Ether is trading at $3,410, so a decrease to $2,400 would represent a nearly 30% decline.
In a post on June 23, Kang explained that unlike Bitcoin, Ether attracts less institutional interest and lacks strong incentives for conversion into ETFs. Additionally, the network’s cash flows have not been very impressive. Kang believes that an ETH ETF would not provide significant upside.
This projected price drop could be significant considering that Ether reached over $4,000 in March when Bitcoin hit a new all-time high. It almost reached that level again just before the United States Securities and Exchange Commission (SEC) approved Ether ETFs.
Kang predicts that spot Ether ETFs will attract only 15% of the flows that spot Bitcoin ETFs have seen, in line with estimates from Bloomberg ETF analysts Eric Balchunas and James Seyffart, who estimate the range to be between 10% and 20%. Based on the first six months of data, where only $5 billion in new funds flowed into spot Bitcoin ETFs, it is estimated that spot Ether ETFs could receive $840 million in “true” inflows during the same period.
However, not everyone agrees with Kang’s price prediction. Industry analyst Patrick Scott, also known as Dynamo DeFi, believes there will be a similar directional movement to spot Bitcoin ETFs but does not expect Ether’s price to double.
On the other hand, asset management firm VanEck believes that spot Ether ETFs can contribute to Ether reaching $22,000 by 2030.
Kang argues that Ethereum’s pitch to investors as a decentralized financial settlement layer, a world computer, or a Web3 app store is a “hard sell” when looking at the data. While Ethereum’s future as a cash flow “machine” seemed promising during the decentralized finance and non-fungible token cycles, the current situation makes it resemble an overpriced tech stock.
Kang also mentioned that the surprise approval of Ether ETFs leaves issuers with less time to market to institutional investors. However, some approved Ethereum ETF applicants, such as Bitwise and VanEck, have already released Ethereum-themed ads.
Kang believes that the exclusion of staking from the proposed spot Ether ETFs may discourage investors from converting their Ether into ETFs.
Although BlackRock and other financial institutions have started exploring real-world asset tokenization on Ethereum, Kang is uncertain about the impact this will have on Ether’s price.
Kang suggests that the ETH/BTC price ratio could decrease from the current 0.054 to as low as 0.035 over the next 12 months. However, he also believes that if Bitcoin rallies to $100,000 in the next six to nine months, it could “drag” Ether to a new all-time high in the process.