Source: PaxForex Premium Analytics Portal, Fundamental Insight
Anticipation is growing within the cryptocurrency industry regarding the potential approval of a spot exchange-traded fund (ETF) for Ethereum, following in the footsteps of Bitcoin. Several Wall Street investment firms have submitted applications to the Securities and Exchange Commission (SEC), with a potential decision expected by May 23.
Enthusiasm among market participants is palpable, and predictions from entities like Standard Chartered Bank suggest that Ethereum could experience a substantial 70% surge in the coming months, potentially reaching $4,000 by summer's outset. However, this optimistic outlook prompts scrutiny when considering the recent history of Bitcoin.
Drawing a parallel to Bitcoin's journey from the announcement of a BlackRock spot Bitcoin ETF application in June to its official approval on Jan. 10, which led to an 85% surge in Bitcoin's price, investors are speculating that Ethereum might undergo a similar trajectory. The logic appears compelling: if Bitcoin saw an 85% increase, a 70% rise for Ethereum seems plausible.
Yet, this perspective overlooks crucial nuances. Firstly, the approval of the spot Bitcoin ETF did not translate into significant price gains; rather, it mirrored a classic "buy the rumor, sell the news" scenario. Since the ETFs began trading on Jan. 11, Bitcoin's price has declined approximately 8%, underscoring a degree of disappointment in the performance of Bitcoin ETFs. Despite Wall Street's introduction of Bitcoin ETFs, the price remains around $43,000.
Secondly, Ethereum already experienced a price surge in January amid expectations surrounding Bitcoin ETFs. The price briefly spiked to $2,500 in anticipation of Ethereum being the next major cryptocurrency to secure an ETF. However, almost a month later, the price has retreated to around $2,300, suggesting that any positive impact from ETF approval may be fleeting at best.
The question of investor demand looms large in the context of Ethereum's potential as the next cryptocurrency to have a spot exchange-traded fund (ETF). Despite being the second-largest cryptocurrency globally, Ethereum has often taken a back seat to Bitcoin, garnering less excitement for new investment products. In contrast to Bitcoin, which is widely seen as a store of value, a hedge against inflation, and a safe haven asset during economic uncertainties, Ethereum lacks the same narrative of being "digital gold" and is not typically considered an inflation hedge. Consequently, from a portfolio optimization standpoint, Ethereum holds less appeal for investors.
Moreover, recent attempts to introduce new futures-based Ethereum ETFs in October encountered limited investor appetite, underscoring the prevailing sentiment favoring Bitcoin over Ethereum.
Looking ahead, the looming Bitcoin halving event scheduled for April 22, a month before the anticipated spot Ethereum ETF approval, adds another layer of complexity. Bitcoin halvings, occurring once every four years, have historically led to substantial price rallies. Consequently, the financial media is expected to be inundated with stories about the Bitcoin halving, potentially overshadowing news about the Ethereum ETF. Any gains for Ethereum during this period might be attributed to the Bitcoin halving rather than ETF approval.
Maintaining realistic expectations is emphasized, especially concerning a $4,000 price target for Ethereum. The article cautions that such a target appears aggressive, highlighting Ethereum's previous all-time high of $4,891 during the peak of the last crypto bull market rally. Even The Merge, considered a significant event in Ethereum's history, failed to propel the token anywhere near $4,000.
In echoing Warren Buffett's famous remark that "forecasts may tell you a great deal about the forecaster; they tell you nothing about the future," the article cautions against relying solely on forecasts, particularly those made by Wall Street investment firms. It suggests investing in Ethereum based on its current valuation rather than anticipating a substantial price rally between now and the summer, emphasizing the uncertainty surrounding timing and the accuracy of forecasts in the cryptocurrency market.
As long as the price is above 2170.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 2308.50
- Take Profit 1: 2445.00
- Take Profit 2: 2600.00
Alternative scenario:
If the level of 2170.00 is broken-down , follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 2170.00
- Take Profit 1: 2070.00
- Take Profit 2: 1950.00
