Last week, the SEC approved the 19b-4 application format for a spot Ethereum ETF, a significant step towards mainstream adoption of the cryptocurrency. Bloomberg analysts predict that by mid-June, the SEC will also approve the S-1 format, which is expected to trigger a surge in investments and drive up Ethereum’s value.
Promising Predictions for Ethereum
According to CoinFactiva, which employs linear regression and examines the relationship between Bitcoin’s growth and inflows into spot ETFs, Ethereum could potentially reach $5,000 within 100 days of the ETF launch. This optimistic prediction hinges on Ethereum ETFs achieving at least 50% of the inflow dynamics observed with Bitcoin ETFs, potentially gathering $3.9 billion in investments during this period.
Potential for Correction Post-Launch
However, there is a high likelihood that Ethereum will face a correction shortly after the funds’ launch, similar to what happened with Bitcoin. When Bitcoin ETFs were launched, Bitcoin’s price dropped by 21% over 12 days, primarily due to the unlocking of assets from Grayscale’s GBTC fund, which transitioned from a trust to a spot ETF. During the first ten days, the fund liquidated $500 million daily, resulting in a loss of $17.6 billion in investments this year.
Increased Approval Chances and Market Reactions
On May 20, the SEC requested applicants to revise their submissions, significantly increasing the chances of approval for spot ETFs. Savvy speculators quickly bought ETHE shares, reducing the discount to the underlying asset from 22% to 7% within days. Once the ETF is converted, assets will be unlocked, and investors who bought shares at a discount will start realizing profits. A similar scenario occurred with GBTC’s conversion, indicating that seller pressure is guaranteed post-launch, while investment interest remains uncertain.
Challenges and Opportunities
Ethereum’s lower market cap offers more dynamic growth potential. However, its ambiguous legal status (commodity/security), SEC’s staking program claims, and internal conflicts (increased censorship, MEV influence, shifting interest from L1 to L2 and L3) suggest challenges in attracting broad capital.
Conclusion
Mathematical models show promising prospects for Ethereum following the ETF launch, but investors should exercise caution. If inflows into new funds do not offset the outflows from ETHE, as happened with Bitcoin, the $5,000 target might be unattainable this year. Investors are advised to stay informed and be prepared for potential market corrections following the launch.