What's next for ETH? Two opposing opinions

📈 Chief Investment Officer of Bitwise (which has a BTC ETF and an ETH ETF on the way) Matt Hogan outlined the following points as tailwinds for ETH:

1️⃣ Significant new demand (eight ETFs launched on Ether)

2️⃣ Limited supply: net supply is limited to zero (for the life of me, I don’t understand what he’s talking about.  He probably meant the ratio between coins issued and coins burned, but yesterday 2542 ETH were issued as rewards to stakers, and 258 ETH were burned)

3️⃣ Regulatory clarity: ETF approval and closure of the SEC investigation into Consensys (Clarity for us, but not for pension funds and other institutions that allocated 0.1% of the portfolio to BTC, and probably haven’t heard about ETH)

4️⃣ Improved throughput: Dencun update (this March update reduced L2 fees by 5-10 times by introducing additional storage space, but it did not affect the gas size in Ethereum itself)

5️⃣ Improved user experience: for example, Base (Friend.tech migrates to its own blockchain, but in general, it depends on taste and color as they say)

6️⃣ Institutional adoption: companies like BlackRock will first create projects on Ethereum (I agree here, but the main question is: will there be demand for the product?)

7️⃣ Altseason is approaching (huge inflows into ETH ETFs could indeed reduce the dominance of BTC and increase the capitalization of altcoins, but regulatory problems and high rates prevent this)

8️⃣ Macro conditions: reduction in key rates (their reduction is predicted at least from the beginning of the year, but they can’t be expected before September)

9️⃣ Elections: The main catalyst for the adoption of crypto (believing Trump, who does not fulfill his election promises and then says: “We should have voted earlier,” is cool)

📉 Andrew Kang, CEO of the venture fund Mechanism Capital, on the contrary, is extremely skeptical about the potential of ETH. The article is long, so the main conclusions are:

1️⃣ Analysis of flows into BTC ETF: total AUM to date exceeds $55 billion, but if you subtract GBTC, which already existed in the form of a trust before the ETF was approved, total inflows over 6 months equal $14.5 billion

Of that $14 billion, not all of it is pure real inflow. It is important to note that up to $4.5 billion can be made up of underlying trades such as buying on the spot market and going short [with a delivery date] on the CME

ETF analysts also expect significant conversion of spot BTC into ETF shares by large holders. If companies transfer their BTC in exchange for ETF shares, this is also reported as an "inflow" in daily reports, which could amount to an additional ~$5 billion

Thus, the real inflow over the last six months could reach about $5 billion

2️⃣ Inflows into ETH ETF: Many exchange-traded fund analysts predict that inflows into ETH ETFs will be between 10% and 25% of inflows into the BTC ETF

According to Andrew's forecasts, the inflow will be 15% of the Bitcoin ETF. Given that ETH's market capitalization is 33% of BTC, an optimistic scenario would see inflows of between $2.5 billion and $4.5 billion, of which actual inflows could range from $0.8 billion to $1.5 billion in the first six months

3️⃣ $5 billion inflow increased the price of BTC from $40,000 to $65,000? - No

The spot market has a wide variety of buyers, including both funds and other participants. MicroStrategy's Michael Saylor, USDT issuer Tether (which dedicates 15% of its profits to buying BTC), and high-net-worth clients are all contributing to increasing demand for BTC

4️⃣ ETH still has less understanding among institutional investors unfamiliar with crypto

The most common explanation for Ethereum is that it is a "technology asset." You can call it whatever you want: a global computer or a Web3 “app store” that provides infrastructure for development, the fact remains that the price largely depends on the performance of DeFi

5️⃣ Add to this: How to explain to a pension fund or banking trust that ETH is a productive asset if, unlike BTC, it does not have a normal deflationary mechanism (the volume of on-chain transactions in a month fell from $6 billion per day to $3.2 billion 👉 the amount of ETH burned is decreasing, but due to the popularity of liquid (re)staking, the number of stakers is growing, which increases emission)

6️⃣ Andrew expects a small influx into ETFs after their final approval

One of the main reasons is the limited time to convince large ETH holders to transfer their holdings to ETFs

In addition, the process itself is not attractive, since it requires giving up not only staking with its profitability of about 3%, but also the opportunity to participate in DeFi, as provided by tools like stETH or eETH

7️⃣ Andrew's Opinion: If BTC hits $100k in 2025, ETH will likely renew its high, but the ratio ETH/BTC will continue to decline

The only hope for ETH, which is currently in a downtrend relative to BTC, is the active tokenization of real assets on Ethereum

🙉 I’ll put in my 5 cents. Unlike long-term BTC holders (Long-Term Holders), who have been actively getting rid of coins since January of this year - having sold more than 1 million BTC - ETH holders, on the contrary, are accumulating positions.

Since January 2024, they have added 7 million ETH to their holdings, and have also doubled their holdings since the start of 2022 (and in 2.5 years, Bitcoin-LTH has only increased their holdings by 18%)

But it is obvious that in the case of ETH the indicator is growing so much thanks to liquid (re)staking