Ethereum
Will Ethereum Skyrocket? Analyst predicts $6,000 by September
Popular crypto analyst degentrading (@degentradingLSD) made a bold prediction that Ethereum will hit $6,000 by September 2024. This prediction comes in response to an analysis from Mechanism Capital founder Andrew Kang, who expects what Ethereum is underperforming despite Imminent launch of Ethereum spot ETFs in the United States.
Andrew Kang’s analysis predicts a continued downward trend for ETHBTC, with the ratio expected to range between 0.035 and 0.06 over the next year. In his detailed thread on X, Kang expressed skepticism about Ethereum’s potential, even though the ETF’s launch is only days away.
Why Ethereum Could Reach $6,000 By September
Degentrading, however, presented a counterargument in a thread on
He explains: “Before the ETF, it was very expensive to trade in cash and hold CME due to margin requirements. Therefore, the upper limit of base transactions is likely capped at this amount. This idea suggests that the advent of the ETF could significantly ease trading constraints, potentially unlocking a significant influx of capital.
However, he tempers this by discussing the challenges posed by the extinction of prime brokers like Genesis, which complicates spot borrowing as a hedge against long positions in CME futures. According to degentrading, “unless market makers can frequently charge a bid/ask spread, they are effectively locking in a loss. Therefore, the number of transactions based on the CME must be in the minority. I would set this figure at $1 billion to $2 billion maximum. That leaves about $7 billion in potential inflows, a figure he describes as “heavily dependent on assumptions.”
Degentrading contrasts Ethereum’s position with Bitcoin’s, criticizing the sentiments of analysts like Eric Balchunas. “Nothing in traditional finance is as exciting as technology. Bitcoin is branded as digital gold or millennial gold. The market capitalization of gold is around $15 trillion,” he notes. In contrast, Ethereum is considered a decentralized global settlement layer or global computer, with the US stock market already valued at $50 trillion. According to him, this sets a much higher ceiling for Ethereum.
He further explains that in his discussions with traditional finance (tradfi) professionals, there is more enthusiasm for ETH and even SOL than for BTC. “People are much more enthusiastic about ETH or SOL. Therefore, I would set the inbound conversion rate at half that of Bitcoin, which translates to approximately $3-4 billion in ETH,” degentrading claims.
One of the key points of Degentrading’s argument is the relative illiquidity of Ethereum compared to Bitcoin. He points out that although Ethereum is about a third the size of Bitcoin, its liquidity is only about 10% of that of BTC. “This means that an inflow of $3-4 billion will move ETH significantly,” he points out. This illiquidity could lead to large price movements with relatively smaller capital inflows.
Addressing the current market positioning, Degentrading highlights the overall gloomy sentiment on Crypto Twitter (CT), considering it the best technical setup for Ethereum. He notes: “As the ETH ETF launch approaches, people are setting expectations of $500 million in inflows over six months. This is the BEST technical setup for ETH.
An important factor in Degentrading’s analysis is the anticipated conversion of Grayscale’s Ethereum Trust (ETHE) into an ETF. He suggests that ETHE will likely face much less selling pressure than Grayscale Bitcoin Trust (GBTC) due to less lender surplus. “ETHE will also likely face MUCH LESS selling pressure than GBTC due to the much smaller lender surplus,” he notes.
Impact of cash and carry transactions
Andrew Kang responded to Degentrading’s analysis, highlighting the involvement of large funds like Millennium, which holds $2 billion in ETFs. Kang emphasizes that these funds engage in basic professions and are not long-term investment funds. “Millennium alone has $2 billion in ETFs. This is not a long-term investment fund. They carry out these types of basic transactions. This is just a fund from an old case,” Kang said.
Degentrading acknowledged this, but highlighted the financial implications of holding a cash and carry position. He argued that the cost of holding such positions earns significant amounts, which impacts the profitability of the market maker. “With this in mind, the cost of holding a cash and carry would earn Millennium $300 million and cost the market maker that amount, implying that the delta is supported by a naked delta on the futures contracts,” Degentrading retorted.
At press time, ETH was trading at $3,362.90.
Featured image created with DALL·E, chart from TradingView.com