Analysts from a major British bank say that Ethereum (ETH +2.03%) should more than double from here to the end of 2024. Does this projection make sense?
CRYPTO: ETH
Key Data Points
Standard Chartered's bullish Ethereum analysis
Geoff Kendrick, head of crypto research and emerging markets foreign exchange at Standard Chartered (SCBF.F -1.48%), hung an $8,000 year-end price target on Ethereum (ETH +2.03%) earlier this week.
Speaking to the crypto news site The Block on Tuesday, Kendrick predicted that the U.S. Securities and Exchange Commission (SEC) would approve the first exchange-traded funds (ETFs) tracking Ethereum's spot price. He argued that the approval would inspire large money inflows into the Ethereum cryptocurrency, similar to the inflows that followed after the approval of spot Bitcoin ETFs in January.
The analyst also noted that he called the money-flow effects of the Bitcoin ETF approval correctly, and underscored the long-term price boosts that should result from these substantial investment moves.
Mind you, Kendrick based his Ethereum price target on his latest Bitcoin (BTC +0.72%) target. In other words, the Ethereum ETFs strike him as good news for the crypto market as a whole, not necessarily driving Ethereum prices any faster than the rest of the sector. Historically, Ethereum has closely followed Bitcoin's price movements due to their strong market correlation and shared investor sentiment.
"Given that we now see Bitcoin reaching the $150,000 level by end-2024, this would imply a level of $8,000 for Ether," the Standard Chartered analyst said.
SEC moves closer to approving Ethereum ETFs
Two days later, the SEC approved a rule change that will result in the first Ethereum-based ETFs on the American markets. The funds aren't hitting the market right away, as the SEC must review each application in detail before approving anything. While this process could take months, the established precedent of Bitcoin ETFs suggests that the SEC's approval may be expedited. It's still a big move in the direction of final approvals, which looks like a matter of time now.
Crypto investors were enthusiastic about Standard Chartered's forecast, driving Ethereum's price 23% higher the next day while Bitcoin rose as much as 7%.
Market reactions to the forecast and ETF news
The two largest cryptocurrencies barely moved on the actual ETF news, though. Ethereum has stayed steady since Kendrick's forecast and Bitcoin is down by a couple of percent on Friday.
But Kendrick's analysis still looks directionally correct. The combination of ETF approvals and the recent Bitcoin halving should indeed power another price surge in Bitcoin, Ethereum, and many smaller altcoins over the next year or so. Growth investing star Cathie Wood of Ark Invest also pegged her year-end Bitcoin target at approximately $150,000, with much loftier long-term goals in mind.
Evaluating Kendrick's analysis and its implications
From a perspective of simple logic, the idea of rising crypto prices makes sense.
Bitcoin's market value is receiving boosts from both sides of the supply and-demand calculation. The halving of Bitcoin mining rewards makes it harder to come by freshly minted digital coins. At the same time, the new ETFs open the floodgates to nearly direct Bitcoin investments by several new types of buyers -- retail investors can now access Bitcoin ETFs (and soon Ethereum ETFs) in their retirement accounts, while institutional money managers can rely on familiar ETFs instead of opening new accounts in unapproved crypto exchanges.
Burning the value candle at both ends, Bitcoin is experiencing higher demand and strictly limited supply. That's a recipe for higher prices, especially since the necessary Bitcoin mining process stops making economic sense unless coin prices increase enough to make up for the smaller rewards.
And where Bitcoin goes, other cryptocurrencies tend to follow. In particular, Ethereum tends to follow Bitcoin's price chart quite closely:
Ethereum Price data by YCharts
Balancing your portfolio with crypto investments
Standard Chartered's Ethereum target stands 116% above the smart contracts pioneer's current price (and 160% beyond where it sat before Kendrick spoke to The Block). I can't promise that it will meet this exact goal, but I'm convinced that both Ethereum and Bitcoin will rise as the year plays out.
Unexpected twists can throw a spanner in the works, of course, and other unplanned events might drive the cryptos even higher instead. You never really know what will happen in this young and volatile market until it happens.
Hence, I wouldn't recommend backing up the truck, betting the literal farm, or otherwise going overboard with crypto investments right now. A diversified approach with crypto playing a modest part in a diversified portfolio will let you enjoy the benefits of a price surge without risking it all. Ethereum looks like a solid buy today, but I wouldn't hold my breath waiting for Kendrick's specific $8,000 target to materialize.
