Bitwise Asset Management’s Chief Investment Officer has predicted that the introduction of Ethereum Exchange-Traded Products (ETPs) will drive ether (ETH) prices to new all-time highs above $5,000 by the end of the year.

The CIO suggests that ETP flows could have a bigger impact on Ethereum than they did on Bitcoin.

The Road to Ethereum’s New All-Time-High

Matt Hougan claims that the conditions are ideal for a price rally, with ETPs expected to draw in $15 billion in new assets over the course of the next 18 months and ETH now selling at about $3,400, just 29% below its all-time high. Ethereum’s expected price increase is contingent upon basic supply and demand dynamics. ETPs bring new sources of demand to ETH, but they don’t change the essential principles. The emergence of spot Bitcoin ETFs in January was followed by the observation of this trend with BTC. Since then, the quantity of Bitcoin that miners have produced has more than doubled for these financial instruments, resulting in a significant price increase. Bitcoin has increased by more than 110% since the market started factoring in and by about 25% after the ETP introduction. Bitcoin has risen approximately 25% since the ETP launch and over 110% since the market began factoring in the possible products in October 2023.

However, Matt warned that the first few weeks after the ETP launch might experience some volatility. This could happen because the $11 billion Grayscale Ethereum Trust (ETHE) is switching to an ETP, which might cause short-term selling. Despite this, the CIO is confident that by the end of the year, ETH will hit new record highs, with even greater gains possible if more money flows in than expected.

Ethereum’s ETP Gains Might Be Bigger Than Bitcoins

There are several indications that Ethereum may benefit more from ETP inflows than Bitcoin. At the time of Bitcoin ETPs’ introduction, the asset’s inflation rate was 1.7%, meaning that $16 billion in BTC purchases were needed yearly to keep everything in balance. With 120 million ETH still available, Ethereum has had zero inflation over the last 12 months. The use of ETH by different Ethereum-based apps is what maintains this equilibrium by counteracting the everyday creation of fresh ETH. There is a strong chance that prices will rise when there is no fresh supply to match the existing demand. Moreover, more activity on the Ethereum network would raise the natural demand for ETH even more.

Ethereum’s “proof of stake” consensus process offers an additional benefit. Ethereum stakers do not have significant upfront fees and are not required to sell their rewards, in contrast to Bitcoin miners who frequently must sell their just generated BTC to pay for operating expenditures. As a result, there is less daily pressure to sell ETH, improving the supply-demand equilibrium. At the moment, 28% of all ETH is staked, which means it is locked in contracts for a predetermined amount of time and cannot be sold. The remaining 13% is restricted by decentralised financial smart contracts, which lowers the supply. Since over 40% of ETH is essentially off the market, the impact of fresh demand from ETP inflows may be amplified.