Spot Ethereum ETFs may bring up to $45 billion of inflows if approved, says Standard Chartered Bank

Spot Ethereum ETH -2.23% exchange-traded funds could still be approved by their initial deadline of May 23, according to Standard Chartered Bank, despite skepticism expressed by other commentators.

"My view is still that they will be approved on May 23. Although I note this is now a non-consensus view," Geoffrey Kendrick, head of forex and crypto research at Standard Chartered Bank, told The Block in a statement. "If the ETFs are approved, I estimate $15-45 billion of inflows will come in the first 12 months, using the same logic as I applied to the BTC -0.49% ETF inflows."

Earlier this year, Kendrick predicted that spot Ethereum ETFs would likely be approved on May 23 primarily because the Securities and Exchange Commission has not classified ETH as a security in its legal actions against crypto companies. Now, the recent announcement by the London Stock Exchange that it will accept applications for exchange-traded notes backed by BTC and ETH in Q2 "increases the likelihood that the US SEC will approve ETH ETFs on 23 May," Kendrick said in a report on Monday.

Kendrick acknowledged that most commentators disagree that the SEC will approve spot Ethereum ETFs on May 23. Last week, Bloomberg senior ETF Analyst Eric Balchunas lowered his expectations of a spot ether ETF getting approved in May to 30%, down from 70% in January. The Polymarket predictions platform also decreased its expectation to 28% from 74%.

Kendrick maintains optimism regarding the May 23 deadline and anticipates substantial inflows to ETH driven by ETFs, mirroring the pattern observed with BTC ETFs following their approval.

"We estimate that spot ETFs will drive inflows of 2.39-9.15 million ETH in the first 12 months after approval," he said in the report, which equates to roughly between $15 billion and $45 billion.

Ether price could reach $8,000 by end-2024 and $14,000 by end-2025

According to Kendrick, if spot Ethereum ETFs get approved in May, the price of ETH could reach $8,000 sooner than previously expected. He now anticipates the price hitting $8,000 by the end of 2024, two years earlier than he previously predicted. Kendrick has also set an ETH price target of $14,000 by the end of 2025.

"Specifically, we think ETH would keep pace with BTC, with the current 5.4% price ratio holding for the rest of 2024," he said in the report.

Given that Standard Chartered now sees BTC reaching the $150,000 level by the end of 2024, this would imply a level of $8,000 for ETH, he said. In 2025, the bank sees the ETH-to-BTC price ratio rising back to the 7% level that prevailed for much of 2021-22. Kendrick added that his estimated BTC price level of $200,000 at the end of 2025 would imply an ETH price of $14,000.

Earlier Monday, in a separate note, Standard Chartered said the bitcoin price could even reach $250,000 at some point in 2025 if strong spot bitcoin ETF inflows continue and/or forex reserve managers start buying bitcoin this year.

"Coincidentally, our estimated inflows for BTC and ETH are similar as a percentage of outstanding coins in circulation," Kendrick said in today's ETH report. "For BTC, our estimated inflows range from 2.2-6.7% of total coins in circulation; for ETH, the equivalent percentages are 2.0-7.6%. We are comfortable with the ETH ranges being slightly wider due to ETH's marginally higher volatility."

Ethereum's Dencun upgrade

Ethereum's recent Dencun upgrade, which sharply lowers transaction fees on Layer 2 networks, also makes Ethereum more competitive, according to Kendrick.

He expects the "bridge" category to increase in importance, given the Dencun upgrade. Kendrick also anticipates that further in the future, Ethereum's use cases will evolve towards gaming and tokenization, adding significant demand via the existing NFT and DeFi channels, respectively.

"Importantly, this should provide 'proof of concept' examples in which real-world industries come on-chain to exploit the benefits of Ethereum over their existing setups," he said. "We expect significant developments on these fronts by 2025-26."