The famous crypto analyst degentrading (@degentradingLSD) made a bold prediction that Ethereum will reach $6,000 in September 2024. This prediction comes in response to the analysis of the founder of Mechanism Capital Andrew Kang, who expects that Ethereum will not work well despite the imminent launch of the US spot Ethereum. ETFs.
Andrew Kang’s analysis projects a further decline in ETHBTC, with the rate expected to range from 0.035 to 0.06 in the next year. In his detailed note on X, Kang expressed doubts about the potential of Ethereum, despite the launch of the ETF just days away.
Why Ethereum Could Reach $6,000 in September
Degentrading, however, introduced a debate in the thread about X. Degentrading begins by examining the change in CME Open interest (OI) from the pre-ETF days to now, noting a significant increase of about $5 billion.
He explains, “Before ETFs, it was very difficult to monetize and run CME because of the margin requirements. Therefore, the upper limit of the trade is probably up to that value. ” This insight suggests that the arrival of ETFs can greatly ease trading constraints, which could open up large capital inflows.
However, he tempers this by discussing the challenges brought about by the demise of leading buyers such as Genesis, making it difficult to lend the property as a hedge against CME’s future. According to degentrading, “Unless market makers can consistently charge the bid/ask spread, they are effectively covering losses. Therefore, the minimum trading volume for the CME basis should be minimal. I would put the figure at $1-2 billion max.” That leaves an estimated $7 billion, a figure he described as “highly speculative.”
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Degentrading compares Ethereum’s position to that of Bitcoin, criticizing the sentiments of analysts like Eric Balchunas. “Nothing in traditional finance is as exciting as technology. Bitcoin has the symbol of digital gold or millennial gold. The gold market is estimated at $15 trillion,” he notes. In contrast, Ethereum is seen as a layer for living in the world or a global computer, the US stock market already has a value of $ 50 trillion. This, he says, sets a very high ceiling for Ethereum.
He goes on to explain that in his discussions with experts in traditional finance (tradfi), there is more enthusiasm for ETH and even SOL compared to BTC. “People are very happy with ETH or SOL for that matter. Therefore, I can put the conversion rate of income on the part of Bitcoin, which means about 3-4 billion dollars in ETH, “says the wrap.
One of the key points in the degentrading argument is the incompatibility of Ethereum compared to Bitcoin. He highlights that although Ethereum is about one-third the size of Bitcoin, its sales are only about 10% of BTC. “This means that an inflow of $3-4 billion will move ETH materially,” he emphasizes. This irregularity can lead to significant price movements with relatively small capital gains.
Speaking of the current market situation, the downgrade points to negative sentiment in Crypto Twitter (CT), considering it the best technical setup for Ethereum. He notes, “When the launch of the ETH ETF is imminent, you have people setting expectations for $500 million in revenue within six months. This is a VERY technical setup for ETH. “
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A key factor in the degentrading analysis is the expected conversion of Grayscale’s Ethereum Trust (ETHE) into an ETF. He suggests that ETHE will likely face much lower selling pressure compared to Grayscale Bitcoin Trust (GBTC) due to less lender overhang. “ETHE will also face MUCH LESS selling pressure than GBTC due to reduced lenders’ funding,” he noted.
The Impact of Currency and Carry Trades
Andrew Kang responded to the degentrading analysis, highlighting the involvement of large funds such as Millennium, which manages a $2 billion ETF. Kang points out that these funds involve basic trading and are not just long-term investment funds. “Millennium alone owns a $2 billion ETF. They are not just a long-term investment fund. They do these types of basic trades. This is only one bag from the old file,” said Kang.
Degentrading acknowledged this but emphasized the cost implications of holding cash and carrying space. He pointed out that the cost of holding such positions removes significant amounts, which affects the profitability of the market maker. “On that assumption, the cost of holding cash and carrying would take $300 million out of Millennium and cost the market maker that amount, which means that delta carries a naked delta in the future,” Degentrading said.
At press time, ETH traded at $3,362.90.
The featured image was created with DALL·E, a chart from TradingView.com
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