Analyst Predicts Ethereum Could Reach $6,000 By September 2024
Popular crypto analyst degentrading has made a bold prediction that Ethereum's price will soar to $6,000 by September 2024. This prediction contrasts with an analysis by Mechanism Capital founder Andrew Kang, who expects Ethereum to underperform despite the imminent launch of US spot Ethereum ETFs.
Reasons Behind the Prediction
Degentrading's analysis hinges on several factors, beginning with the change in CME open interest (OI) from pre-ETF days to the present, noting a substantial increase of approximately $5 billion. He explains that before ETFs, it was challenging to perform cash and carry trades on CME due to margin requirements. However, with the advent of ETFs, trading constraints could significantly ease, potentially unlocking a substantial capital influx.
He also addresses the extinction of prime brokers like Genesis, complicating spot borrowing as a hedge against CME futures longs. According to degentrading, unless market makers can frequently charge a bid/ask spread, they are effectively locking in a loss. Thus, the overall amount of CME basis trades is probably limited to around $1-2 billion, leaving an estimated $7 billion in potential inflows, although this is highly assumption-dependent.
Comparative Analysis: Ethereum vs Bitcoin
Comparing Ethereum to Bitcoin, degentrading criticizes views from other analysts like Eric Balchunas. He points out that while Bitcoin has the branding of digital gold, Ethereum is seen as a decentralized global settlement layer or world computer. Given that the US stock market is valued at $50 trillion compared to gold's market cap of $15 trillion, Ethereum has a potentially higher ceiling.
Degentrading's discussions with traditional finance (tradfi) professionals reveal more enthusiasm for ETH and SOL compared to BTC. He estimates the inflow conversion rate for ETH to be about half of Bitcoin’s, translating to approximately $3-4 billion into ETH.
Ethereum's Illiquidity Advantage
Another crucial point is Ethereum’s relative illiquidity compared to Bitcoin. Although Ethereum is roughly one-third the size of Bitcoin, its liquidity is only about 10% of BTC. This means that an influx of $3-4 billion could cause significant price movements.
Current Market Sentiment
Addressing the overall bleak sentiment on Crypto Twitter (CT), degentrading sees this as a positive technical setup for Ethereum. On the cusp of the ETH ETF launch, expectations for $500 million of inflows over six months create a favorable technical environment for ETH.
Grayscale’s Ethereum Trust (ETHE)
Degentrading also highlights the anticipated conversion of Grayscale’s Ethereum Trust (ETHE) into an ETF, suggesting it will likely face much less selling pressure compared to the Grayscale Bitcoin Trust (GBTC) due to a lesser lender overhang.
Impact of Cash and Carry Trades
Andrew Kang's response to degentrading’s analysis emphasizes the involvement of large funds like Millennium, which own $2 billion of the ETF. These funds engage in basis trades and are not long-only investment funds. Kang highlighted the cost implications of holding such positions, impacting market makers' profitability. He estimates that these costs could influence the market dynamics significantly.
At press time, Ethereum (ETH) traded at $3,362.90.
