Venture capital firm Mechanism’s co-founder, Andrew Kang, pointed out in an article that the upside potential for Ethereum ETF is limited, and in the long run, Ethereum is more like a declining Intel rather than a Nvidia or Amazon.
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Limited Upside Potential for Ethereum ETF
1. ETH Has Followed BTC’s Rise
2. Inflows of Bitcoin Spot ETFs are Exaggerated
3. ETH’s Transaction Volume Will Only Be 15% of BTC’s
Ethereum is Like Intel, Not Nvidia or Amazon
On-Chain Activities are Shifting to Major Public Chains
Limited Upside Potential for Ethereum ETF
1. ETH Has Followed BTC’s Rise
Andrew Kang
mentioned that he had publicly expressed optimism about the skyrocketing of Bitcoin when he submitted the Bitcoin ETF application to BlackRock. Since then, Bitcoin has increased by 2.6 times, while Ethereum has increased by about 2.1 times.
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From the perspective of the bottom of the cycle, both BTC and ETH have already increased by about 4 times. So even if the Ethereum ETF is successfully listed, is there still room for growth?
He believes that unless the fundamentals of Ethereum improve significantly, he is not optimistic about its subsequent gains.
2. Inflows of Bitcoin Spot ETFs are Exaggerated
He further pointed out that the assets under management of Bitcoin ETFs have reached 50 billion USD, and the net inflows on the books since their listing are 14.5 billion USD. However, this is not the actual influx of funds and needs to deduct neutral inflows such as arbitrage trading and spot transfer.
He estimated that about 450 million USD of net flow is arbitrage trading, and large holders like BlockOne have also converted a large amount of BTC spot into ETF, which is about 5 billion USD. Therefore, the actual net inflow of Bitcoin ETF is only 5 billion USD.
3. ETH’s Transaction Volume Will Only Be 15% of BTC’s
Bloomberg ETF analyst Eric Balchunas once estimated that ETH’s transaction volume may be only 10% of BTC’s. Based on the inference from the second point, the net inflow on the books of ETH spot ETF after 6 months of listing is about 1.5 billion USD, and the actual net inflow is about 500 million USD.
Andrew Kang predicts that the actual net inflow will be around 15% of BTC’s, and the familiarity of the crypto industry with ETH may lead to higher expectations for Ethereum ETF compared to the expectations of traditional retail investors. The general public may not be as enthusiastic about ETH as they are about BTC.
He believes that after the launch of the Ethereum ETF, its price will fall to 2,400 USD to 3,000 USD.
(Elderly People Don’t Understand “Ethereum”, Is There a Lack of Selling Points for ETH ETF in Traditional Markets?)
Ethereum is Like Intel, Not Nvidia or Amazon
After analyzing the “limited upside potential for Ethereum ETF,”
Andrew Kang
further criticized the price trend and fundamentals of Ethereum.
Ethereum is usually seen as a technology stock, and he believes that the trend of ETH is similar to the long-term decline of Intel and Cisco:
With growth limitations, slowing innovation, and competition from rivals, Intel has experienced several bubbles in the past. This affects the willingness of investors to invest. Tell me, how would you sell a company with a market value of 420 billion USD (Ethereum) and a P/E ratio of 200, with negative revenue growth? Crypto fools may buy, but given the current fundamentals, it is a delusion to believe that traditional finance will inject a certain amount of capital.
Monthly Chart of Intel
Monthly Chart of ETH/BTC
On-Chain Activities are Shifting to Major Public Chains
Andrew Kang concluded:
It is wishful thinking to believe that Ethereum is following the path of Nvidia or Amazon. These companies have convincing annual growth plans and historical revenue growth, while Ethereum, on the contrary, is witnessing the decline of NFTs, on-chain transactions shifting to other chains, and on-chain fees trending downward. This is a typical bubble peak that occurs in every cycle.
Andrew Kang
Cisco
ETF
Intel
Ethereum
Nvidia
Bitcoin
Further Reading
Crypto Market Faces Selling Pressure: Outflows from Spot ETFs, Decreased Reserves from Mining Firms, Government Agencies Selling
Standard Chartered Bank Plans to Launch Bitcoin and Ether Trading Platform: Actively Supports Customer Demand