Ethereum spot ETH is about to pass. How will the market trend develop in the future?

Author: Climber

Vitalik Buterin once described it this way: Bitcoin is a pocket calculator, while Ethereum is a smartphone. Now, this smartphone is about to be recognized by the US sovereign government.

On May 24, Beijing time, the Ethereum spot ETF faced an approval decision, and it is about to become another cryptocurrency fund product officially recognized by the US SEC after Bitcoin. This is not only a glorious moment for Ethereum, the "king of all chains", but also a major positive for the crypto market.

Looking back on the direction of this event, it can be said that it was unexpected. Before May 21, the probability of Ethereum spot ETF being approved was only 25%, but with the revelation of Bloomberg analyst Eric Balchunas, the SEC's attitude may have changed 180 degrees for political reasons, and this number soared to 75%. The SEC also requires several applicants to submit 19b-4 amendments urgently.

Now that the dust has settled and the crypto market is in a frenzy, we might as well look back on the development of Ethereum and sort out the forecasts of multiple institutions and professionals to get a general understanding of ETH's future trends.

I. Common knowledge about Ethereum

Ethereum is a decentralized, open-source, public blockchain platform with smart contract functions. Ether (ETH) is the native cryptocurrency of Ethereum. Ethereum is the second-highest cryptocurrency in the crypto market, second only to Bitcoin. At the same time, Ethereum is also the most used blockchain by users.

Between 2013 and 2014, programmer Vitalik Buterin was inspired by Bitcoin and first proposed the concept of Ethereum, which roughly means "the next generation of cryptocurrency and decentralized application platform." At the same time, he first introduced Ethereum in a white paper published in 2013. Buterin and other co-founders launched the Ethereum blockchain on July 30, 2015, through an online crowdfunding campaign in the summer of 2014.

The main innovation of Ethereum is that it has designed a platform that can execute smart contracts using blockchain, thereby further strengthening the technical advantages of existing smart contracts. In addition to smart contracts, Ethereum's blockchain can host other cryptocurrencies by using its ERC-20 compatible standard.

Ethereum's goal is to become a global decentralized application platform that allows users around the world to write and run software without being reviewed, downtime, or fraud.

In 2022, Ethereum will transition its consensus mechanism from proof of work (PoW) to proof of stake (PoS), which will reduce Ethereum's energy usage by 99%. At the same time, the name of this transition was changed from "Ethereum 2.0" to "Merge".

Since the release of the white paper in 2013, a total of 25 milestone events have been produced, most of which are fork upgrades, 12 of which are relatively important, and the most recent one is the Cancun upgrade.

Second, Ethereum Spot ETF

Ethereum ETF is a financial product designed to track the price of Ethereum, enabling investors to buy and sell shares on traditional stock exchanges. This regulated investment approach provides investors with a convenient way to participate in the cryptocurrency market without having to directly manage digital assets.

Ethereum ETF operates within the regulatory framework of traditional financial markets. This regulatory supervision enhances investor confidence and ensures compliance with established financial standards. At the same time, ETFs replicate the performance of Ethereum and provide scalability for its value without involving the complexity of ownership.

In addition to easy access, Ethereum ETFs also provide the benefits of regulatory supervision, trading convenience, and diversified investment portfolios. These funds are traded on major stock exchanges, providing liquidity and simplicity for investors who may be new to the cryptocurrency market.

Current Ethereum spot ETF applicants include VanEck, 21Shares &ARK, Hashdex, Grayscale, Invesco &Galaxy, Fidelity, BlackRock, Franklin, and Bitwise.

Variant Fund Chief Legal Officer: If the SEC approves the Ethereum spot ETF, it means that it recognizes that non-pledged ETH is not a security. The agency has previously refused to recognize any asset other than Bitcoin as a non-securities commodity.

III. Impact of the event: ETH hits a new high in multiple data

On May 23, Grayscale Ethereum Trust (ETHE) had a trading volume of US$687 million on the 21st, a new high since May 2021, reaching US$680 million. The previous high was $842 million on May 19, 2021.

Data on May 22:

Matrixport issued a statement saying that Ethereum set the record for the largest single-day volatility in history due to the approval of the Ethereum spot ETF. On the same day, the EthVol (Ethereum volatility) index launched by financial index company T3 Index and options trading platform LedgerX rose to 81.14, close to the highest level of 86.7 in a year, with a daily increase of 12.07%.

ETH's previous largest volatility was concentrated in May 2021, when DeFi trading volume was close to its peak. The two major fluctuations so far in 2024 were mainly policy-driven and related to the SEC and FOMC meetings.

Ethereum futures ETF generated $47.75 million in trading volume, 40% higher than the peak of $34.18 million on March 5, when Ethereum approached the $4,000 mark.

Open interest in Ethereum futures contracts across the network reached $15.6 billion, continuing to hit a record high.

The number of small Ethereum wallets holding up to 10 ETH reached 121 million, a record high.

Hong Kong's three spot Ethereum ETFs soared collectively, with net inflows exceeding HK$5 million as of noon on May 22, the largest net inflow since its launch.

Fourth, ETH price historical trend

Before January 2017, the price of ETH was mostly below $10. In the following year, it continued to rise, and finally reached its first historical high of about $1,300 in mid-January 2018, an increase of about 13,000%.

From January 2018 to July 2020, ETH entered a long ice age, with the price of the currency falling to around $110, a drop of 91.5%.

But with the Fed's massive money printing, the crypto bull market is coming. Starting in the summer of 2020, ETH entered a soaring mode. It hit record highs in May and November 2021, reaching a maximum of $4,810. If calculated based on the previous low point, the increase was as high as 4,272%.

After that, the bull market went and the bear market came, and ETH fell to around $881, a drop of 81.68%. The bear market lasted for two years, from November 2021 to October 2023.

Due to the approval of the Bitcoin spot ETF, the crypto market has gradually entered a bull market, and ETH has also ushered in a warm spring. The price of the currency has risen to $3,800, an increase of about 322.2%. However, compared with the increase in other blue-chip currencies, ETH's performance can be said to be at the bottom.

V. Market Forecast: Generally Seen to Exceed $5,000

Standard Chartered Bank: Ethereum's year-end target price is $8,000, and the price of Ethereum will reach $14,000 by the end of 2025. Geoff Kendrick, head of foreign exchange research and digital asset research at Standard Chartered Bank, said that it is expected that the Ethereum spot ETF will drive an inflow of 2.39 to 9.15 million Ethereum in the first 12 months after its approval. In US dollars, it is approximately equivalent to $15 billion to $45 billion.

Bernstein: Approval of a spot Ethereum ETF would drive its price up 75% to $6,600. Bernstein analysts estimate that the SEC approved a similar Bitcoin product in January, stimulating a 75% increase in Bitcoin prices in the following weeks, and ETH's price trend is expected to be similar.

Lyra: There is a 20% probability that Ethereum will break through $5,000 by the end of June. Nick Forster, founder of Lyra and former Wall Street options trader, said that based on the Lyra options market's hints, there is about a 20% probability that Ethereum will reach $5,000 by June 28, and a 20% probability that it will exceed $5,500 by July 26.

ZhuSu: If the Ethereum spot ETF is approved, Ethereum will rise to $5,400.

QCP Capital: If the approval of the BTC ETF is a reference, ETH may rise by 60% if the ETH ETF is approved. ETH's short-term target is $4,000 and will reach $5,000 later this year.

Coinbase: Ethereum may see an unexpected rise in the coming months. Ethereum's performance this year has lagged behind the broader cryptocurrency market, but its long-term positioning remains strong and there is the potential for an unexpected rise.

Bloomberg: Ethereum ETF is the biggest boost to the crypto market since 2022.

ConsenSys CEO: If the Ethereum spot ETF is approved, the resulting "flood of demand" for Ethereum may lead to supply tightness, thereby pushing up the price of Ethereum.

The CEO explained that institutions that have been exposed to Bitcoin through the newly launched Bitcoin ETF "are most likely to want to diversify their investments into the second approved ETF," and that the natural, pent-up demand for purchasing Ethereum through the ETF will be considerable, but the supply to meet this demand will be less than when the Bitcoin spot ETF was approved in January this year.

Bybit Financial Product Director: The market still underestimates the potential of Ethereum. ETH is still the most decentralized, tested and technically outstanding work ever. I hope Ethereum can be properly valued as a result.

JMP Securities: Coinbase will benefit from the Ethereum ETF.

Other Views:

Bloomberg ETF Analyst: Ethereum ETF may only account for 15% of Bitcoin ETF assets.

Economist Peter Schiff: It is expected that funds will shift from Bitcoin ETF to Ethereum ETF after the approval of the US SEC, which may have a negative impact on spot Bitcoin ETF and Bitcoin.

Kryptanium Capital Co-founder: If the Ethereum ETF is approved, the best trading strategy is to buy SOL/ETH.

Summary

By market value, ETH is the second largest cryptocurrency, second only to Bitcoin (BTC). However, whether in the evaluation of traditional financial institutions or crypto institutions, there is a huge gap between the two in terms of financial value attributes. If the SEC approves the Ethereum spot ETF this time, it is undoubtedly an affirmation and recognition of ETH.

From the above ETH price trend, its price increase trend is gradually declining. However, with the expectation of the approval of its ETF, Ethereum has become a hot commodity in the eyes of many investors, and they have predicted a new historical high. As for whether Ethereum can become the "next generation of cryptocurrency and decentralized application platform", we might as well leave it to the market and time to test.