Following the introduction of spot Ether exchange-traded funds (ETFs), Andrew Kang, co-founder of Mechanism Capital, a venture capital firm focused on crypto, anticipates a substantial decline in Ether’s price, potentially dropping to as low as $2,400. This projection suggests a nearly 30% decrease from its current value. Kang underscored the contrasting levels of institutional interest and network cash flows between Bitcoin and Ether in his analysis posted on X. He highlighted that Ether currently garners less institutional attention than Bitcoin and speculated that the conversion of spot Ether into ETFs may not offer significant incentives. Kang questioned the potential benefits of an ETH ETF, suggesting that its impact on Ether’s price may not be substantial, with his post-ETF launch expectation ranging from $2,400 to $3,000.
Ether ETFs to See 15% of Flows Seen by Bitcoin Funds
If Kang’s forecast proves accurate, it would signify a notable retreat for Ether, especially given its peak above $4,000 in March amid Bitcoin’s record highs. The price nearly revisited that level just before the SEC’s approval of Ether ETFs.
Comparing flows relative to spot Bitcoin ETFs, Kang anticipates that spot Ether ETFs could capture approximately 15% of the flows observed by their Bitcoin counterparts. This projection aligns closely with estimates from Bloomberg ETF analysts Eric Balchunas and James Seyffart, who suggest that spot Ether ETFs might attract between 10% to 20% of the flows.
Kang extends this analysis to Ethereum, estimating that spot Ether ETFs could potentially draw around $840 million in actual inflows over a similar period.
In his analysis, Kang critically questioned Ethereum’s value propositions as a decentralized financial settlement layer, a “world computer,” or a Web3 application store, arguing that the empirical data doesn’t substantiate these claims. He noted that while Ethereum appeared promising as a cash flow generator during the previous decentralized finance and non-fungible token booms, that momentum has not sustained.
Expressing concerns over Ethereum’s lofty valuation, Kang likened it to an overvalued tech stock. He highlighted that the unexpected approval of spot Ether ETFs could constrain issuers’ time to market these products effectively to institutional investors.
Moreover, Kang pointed out a potential hurdle: the lack of staking mechanisms in these proposed ETFs might discourage investors from converting their spot Ether holdings into ETFs.
Ethereum ETF Providers Update Fee and Investment Details
Several prominent asset managers, including VanEck, BlackRock, Grayscale, Invesco Galaxy Digital, and Fidelity, have submitted revised proposals for Ethereum ETFs to the SEC. Eric Balchunas, an analyst at Bloomberg, highlighted these filings, noting that they aim to provide updated details about their respective Ethereum funds.
VanEck’s filing disclosed a management fee of 0.20% for its Ethereum fund, which aligns closely with competitors such as Franklin Templeton, charging 0.19% in management fees.
In contrast, BlackRock has not yet revealed the fee structure for its iShares Ethereum Trust (ETHA). Balchunas suggested that VanEck’s fee announcement may exert pressure on BlackRock to set their management fees below 30 basis points (0.30%) at a minimum.
