Popular crypto analyst degentrading (@degentradingLSD) has made a daring prediction that Ethereum will reach $6,000 by September 2024. This prediction is available in response to an evaluation by Mechanism Capital founder Andrew Kang, who expects Ethereum to underperform despite the upcoming launch of US spot Ethereum ETFs.

Andrew Kang’s evaluation projects a continued downtrend for ETHBTC, with the ratio expected to range between 0.035 and 0.06 over the following yr. In his detailed thread on X, Kang expressed skepticism about Ethereum’s potential, despite the ETF launch being just days away.

Why Ethereum Could Reach $6,000 By September

Degentrading, nevertheless, presented a counter-argument in a thread on X. Degentrading begins by examining the change in CME open interest (OI) from pre-ETF days to the current, noting a considerable increase of roughly $5 billion.

He explains, “Pre-ETF, it was very onerous to perform money and carry on CME attributable to margin requirements. Hence, the upper sure of basis trades might be capped at that quantity.” This insight suggests that the arrival of the ETF could significantly ease trading constraints, potentially unlocking a big influx of capital.

Nonetheless, he tempers this by discussing the challenges posed by the extinction of prime brokers like Genesis, which complicates spot borrowing as a hedge against CME futures longs. In keeping with degentrading, “Unless market makers can steadily charge a bid/ask spread, they’re effectively locking in a loss. Subsequently, the sheer amount of CME basis trades needs to be a minority. I’d peg the figure at $1-2 billion max.” This leaves an estimated $7 billion in potential inflows, a figure he describes as “highly depending on assumptions.”

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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 roughly $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.

He further explains that in his discussions with traditional finance (tradfi) professionals, there’s more enthusiasm for ETH and even SOL in comparison with BTC. “Individuals are far more enthusiastic about ETH or SOL for that matter. Hence, I’d peg the inflow conversion rate at half of Bitcoin’s, which translates to about $3-4 billion into ETH,” degentrading asserts.

One in every of the important thing points in degentrading’s argument is Ethereum’s relative illiquidity in comparison with Bitcoin. He highlights that while Ethereum is roughly one-third the dimensions of Bitcoin, its liquidity is just about 10% of BTC. “Because of this an influx of $3-4 billion will materially move ETH,” he emphasizes. This illiquidity could lead on to significant price movements with relatively smaller capital inflows.

Addressing the market’s current positioning, degentrading points out the general bleak sentiment on Crypto Twitter (CT), viewing it as the very best technical setup for Ethereum. He notes, “On the cusp of the ETH ETF launch, you could have people setting expectations for $500 million of inflows over six months. That is the BEST technical setup for ETH.”

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A very important consider degentrading’s evaluation is the anticipated conversion of Grayscale’s Ethereum Trust (ETHE) into an ETF. He suggests that ETHE will likely face much less selling pressure in comparison with the Grayscale Bitcoin Trust (GBTC) attributable to a lesser lender overhang. “ETHE can even likely face MUCH LESS selling pressure than GBTC due to much lesser lender overhang,” he notes.

Impact Of Money And Carry Trades

Andrew Kang responded to degentrading’s evaluation, highlighting the involvement of huge funds like Millennium, which owns $2 billion of the ETF. Kang points out that such funds engage in basis trades and will not be long-only investment funds. “Millennium by itself owns $2 billion of the ETF. They will not be a long-only investment fund. They do a majority of these basis trades. That’s just one fund from an old filing,” Kang stated.

Degentrading acknowledged this but emphasized the associated fee implications of holding a money and carry position. He argued that the associated fee of holding such positions nets out significant amounts, which impacts the market maker’s profitability. “On that thought, the associated fee of holding a money and carry would net out $300 million to Millennium and price the market maker that quantity, implying that the delta is borne by a unadorned delta on the futures,” degentrading retorted.

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

ETH price, 1-week chart | Source: ETHUSD on TradingView.com

Featured image created with DALL·E, chart from TradingView.com