Popular
crypto
analyst
degentrading
(@degentradingLSD)
has
made
a
bold
prediction
that
Ethereum
will
reach
$6,000
by
September
2024.
This
prediction
comes
in
response
to
an
analysis
by
Mechanism
Capital
founder
Andrew
Kang,
who
expects
Ethereum
to
underperform
despite
the

imminent
launch
of
US
spot
Ethereum
ETFs.

Andrew
Kang’s
analysis
projects
a
continued
downtrend
for
ETHBTC,
with
the
ratio
expected
to
range
between
0.035
and
0.06
over
the
next
year.
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,
however,
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
present,
noting
a
substantial
increase
of
approximately
$5
billion.

He
explains,
“Pre-ETF,
it
was
very
onerous
to
perform
cash
and
carry
on
CME
due
to
margin
requirements.
Hence,
the
upper
bound
of
basis
trades
is
probably
capped
at
that
amount.”
This
insight
suggests
that
the
advent
of
the
ETF
could
significantly
ease
trading
constraints,
potentially
unlocking
a
large
influx
of
capital.

However,
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.
According
to
degentrading,
“Unless
market
makers
can
frequently
charge
a
bid/ask
spread,
they
are
effectively
locking
in
a
loss.
Therefore,
the
sheer
amount
of
CME
basis
trades
has
to
be
a
minority.
I
would
peg
the
figure
at
$1-2
billion
max.”
This
leaves
an
estimated
$7
billion
in
potential
inflows,
a
figure
he
describes
as
“highly
dependent
on
assumptions.”

Related
Reading

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
approximately
$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
is
more
enthusiasm
for
ETH
and
even
SOL
compared
to
BTC.
“People
are
much
more
excited
about
ETH
or
SOL
for
that
matter.
Hence,
I
would
peg
the
inflow
conversion
rate
at
half
of
Bitcoin’s,
which
translates
to
about
$3-4
billion
into
ETH,”
degentrading
asserts.

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

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

Related
Reading

An
important
factor
in
degentrading’s
analysis
is
the
anticipated
conversion
of
Grayscale’s
Ethereum
Trust
(ETHE)
into
an
ETF.
He
suggests
that
ETHE
will
likely
face
much
less
selling
pressure
compared
to
the
Grayscale
Bitcoin
Trust
(GBTC)
due
to
a
lesser
lender
overhang.
“ETHE
will
also
likely
face
MUCH
LESS

 

selling
pressure
than
GBTC
because
of
the
much
lesser
lender
overhang,”
he
notes.

Impact
Of
Cash
And
Carry
Trades

Andrew
Kang
responded
to
degentrading’s
analysis,
highlighting
the
involvement
of
large
funds
like
Millennium,
which
owns
$2
billion
of
the
ETF.
Kang
points
out
that
such
funds
engage
in

basis
trades
and
are
not
long-only
investment
funds.
“Millennium
by
itself
owns
$2
billion
of
the
ETF.
They
are
not
a
long-only
investment
fund.
They
do
these
types
of
basis
trades.
That’s
only
one
fund
from
an
old
filing,”
Kang
stated.

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

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

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

Go to Source
Author: Jake Simmons

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