Matt Hougan, chief investment officer at Bitwise Asset Management, forecasted on Wednesday that the price of Ethereum could surge past $5,000 following the launch of Ethereum ETFs.
"[ETF] inflows will push prices to all-time highs, above $5,000," he declared. “By year-end, I’m confident the new highs will be in.”
Hougan's prediction is grounded in the belief that ETF inflows will significantly impact Ethereum's price by creating new sources of demand—similar to what was observed with Bitcoin after its funds launched. But it will take some time.
“I think the first few weeks could be choppy, as money may flow out of the $11 billion Grayscale Ethereum Trust (ETHE) after it converts” to an ETF, he wrote.
The primary driver for this anticipated price surge is the interplay between supply and demand, he said. ETFs introduce new demand without altering Ethereum's underlying supply fundamentals. Hougan noted that Bitcoin ETFs have purchased 263,965 BTC since their January launch, compared to 129,181 BTC produced by miners, resulting in a substantial price increase.
Hougan outlines three key reasons why Ethereum might see an even greater impact from ETF inflows than Bitcoin.
First, Ethereum's inflation rate has been 0% over the past year, meaning the supply of ETH has remained constant at 120 million. This contrasts with Bitcoin's 1.7% inflation rate at the time its ETFs launched. Hougan said Ethereum-based stablecoins and tokenized funds support the equilibrium between ETH creation and consumption, leading to price appreciation.
Secondly, Hougan pointed to staker dynamics. Unlike Bitcoin miners who need to sell their mined BTC to cover operational costs, Ethereum stakers are not under the same pressure. “There is simply less forced selling each day in Ethereum than in Bitcoin,” Hougan noted.
Finally, he noted that a substantial portion of ETH is staked or locked in decentralized finance (DeFi) contracts. “Currently, 28% of all ETH is staked, meaning it is effectively off the market,” he wrote.
Hougan said he expects Ethereum ETFs to attract $15 billion in new assets over the first 18 months, a significant influx that could drive ETH from its current trading price of approximately $3,400 to new heights.
With ETH trading at around $3,400—just 29% below its all-time high—Hougan concluded that the introduction of ETFs and the resulting demand dynamics make it likely that Ethereum will challenge and surpass its previous records.