Will Ethereum Skyrocket? Crypto Analyst Predicts $6,000 By September

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As a seasoned crypto investor with a background in quantitative analysis, I find degentrading’s perspective on Ethereum’s potential price movement to September 2024 compelling. His deep understanding of market dynamics and the impact of institutional investors, such as Millennium, on trading strategies is insightful.

As a researcher following the crypto market closely, I’ve come across an intriguing perspective from degentrading (@degentradingLSD) regarding Ethereum‘s price forecast. He confidently predicts that Ethereum will reach $6,000 by September 2024. This prediction contrasts with the viewpoint of Mechanism Capital founder Andrew Kang, who anticipates Ethereum may underperform despite the upcoming launch of US spot Ethereum ETFs.

According to Andrew Kang’s assessment, the ETH/BTC ratio is predicted to decline further and may hover between 0.035 and 0.06 during the upcoming year. In his extensive discussion on topic X, Kang voiced doubts about Ethereum’s prospects, despite the impending ETF debut.

Why Ethereum Could Reach $6,000 By September

In response to the discussion on X, Degentrading put forth an opposing viewpoint. They initiated their argument by analyzing the evolution of CME open interest (OI) from before Exchange-Traded Funds (ETFs) existed to the present day. Notably, they observed a significant surge in OI amounting to around $5 billion.

As a crypto investor, I’ve found that before Exchange-Traded Funds (ETFs) were introduced, executing a cash-and-carry strategy on the Chicago Mercantile Exchange (CME) came with substantial challenges due to high margin requirements. Consequently, the maximum size of basis trades was likely limited by these restrictions. However, with the emergence of ETFs, we can anticipate that trading constraints will be significantly eased, which could lead to a substantial influx of capital into this market.

He acknowledges the complexity introduced by the demise of major prime brokers such as Genesis, which makes it harder to employ spot borrowing as a hedge against CME futures positions. As per degentrading’s perspective, market makers need to frequently make a profit from bid-ask spreads to avoid losses. Consequently, the volume of CME basis trades should be limited. Degentrading proposes an estimation of up to $1-2 billion in such trades. This results in a potential inflow of around $7 billion, but this amount is considered highly contingent upon assumptions.

Degentrading contrasts Ethereum’s position with that of Bitcoin, criticizing sentiments from analysts like Eric Balchunas. “Nothing in traditional finance is as exciting as tech. Bitcoin has the branding of digital gold or millennial gold. Gold’s market cap is approximately $15 trillion,” he notes. In contrast, Ethereum is seen as a decentralized global settlement layer or world computer, with the US stock market already valued at $50 trillion. This, he argues, sets a much higher ceiling for Ethereum.

In my conversations with professionals in the traditional finance sector, I’ve noticed a greater level of excitement surrounding Ethereum (ETH) and even Solana (SOL), rather than Bitcoin (BTC). Consequently, I estimate that the inflow conversion rate for these cryptocurrencies would be approximately half that of Bitcoin. This equates to an inflow of around $3-4 billion into ETH.

As an analyst, I’ve noticed an intriguing perspective put forth by degentrading regarding Ethereum’s market liquidity in comparison to Bitcoin. Ethereum, which is roughly one-third the size of Bitcoin in terms of market capitalization, possesses only around 10% of Bitcoin’s liquidity. In simpler terms, a relatively smaller influx of funds, approximately $3-4 billion, could significantly impact Ethereum’s price movement due to its lower liquidity. This aspect could lead to more pronounced price fluctuations with less substantial capital injections.

As a researcher observing the current market landscape, I’ve noticed a prevalent pessimistic tone on Crypto Twitter regarding Ethereum’s position. However, degentrading brings an alternative perspective, viewing this sentiment as the optimal technical setup for Ethereum. With the upcoming Ethereum ETF launch, there are anticipations of substantial inflows to the tune of $500 million over a six-month period. From my analysis, I concur with degentrading – this represents an auspicious technical setup for Ethereum.

In evaluating degentrading’s perspective, the anticipated transformation of Grayscale’s Ethereum Trust (ETHE) into an exchange-traded fund (ETF) plays a significant role. He anticipates that ETHE will experience significantly less selling pressure than the Grayscale Bitcoin Trust (GBTC). “The selling pressure for ETHE is expected to be substantially lighter than for GBTC due to a smaller lender overhang,” he points out.

Impact Of Cash And Carry Trades

Andrew Kang reacted to degentrading’s assessment, bringing attention to the presence of substantial investors such as Millennium in the ETF. Kang emphasized that entities like Millennium, which manage $2 billion of the ETF, do not function as traditional long-only investment funds. Instead, they carry out basis trades. Kang explained, “Millennium manages $2 billion of this ETF. They don’t follow a long-only investment strategy. They conduct basis trades, as mentioned in previous filings.”

Dgentrading acknowledged the reality of holding a “cash and carry” position but emphasized its financial ramifications. He pointed out that the expenses incurred from maintaining such positions can result in substantial losses, thereby affecting the market maker’s overall earnings. In other words, for Millennium to hold this position, it would have to pay out approximately $300 million, while the market maker would face a corresponding loss. Consequently, Dgentrading suggested that the price difference (delta) between the cash and futures positions is being covered by an uncovered (naked) futures delta.

At press time, ETH traded at $3,362.90.

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2024-06-24 11:46