Analysts at Standard Chartered Bank expect Ethereum to more than double by the end of the year. Here's how their bullish analysis was validated and how it moved markets this week.
An analyst at a major UK bank said: Ethereum (ETH 0.76%) It should more than double by the end of 2024. Does this prediction make sense?
Standard Chartered Bank's Bullish Analysis of Ethereum
Jeff Kendrick, Head of Cryptocurrency Research and Emerging Markets FX Standard Chartered (OTC: SCBF.F)sets year-end price target at $8,000 Ethereum (ETH 0.76%) Earlier this week.
Kendrick predicted in an interview with crypto news site The Block on Tuesday that the U.S. Securities and Exchange Commission (SEC) will approve the first exchange-traded fund (ETF) tracking the spot price of Ethereum. He argued that such approval would spur massive inflows into the Ethereum cryptocurrency, similar to the inflows that followed the approval of a spot Bitcoin ETF in January.
The analyst also correctly predicted the impact of the Bitcoin ETF approval on fund flows, emphasizing that such a significant investment move should lead to long-term price appreciation.
Kendrick’s Ethereum price target is his latest Bitcoin (BTC 0.80%) In other words, he believes an Ethereum ETF is good news for the cryptocurrency market as a whole, and won't necessarily boost Ethereum's price faster than the rest of the sector.Historically, Ethereum has closely tracked Bitcoin's price movements due to its strong correlation with the market and sharing investor sentiment.
“Given that Bitcoin is expected to reach the $150,000 level by the end of 2024, Ethereum will reach the $8,000 level,” the Standard Chartered analysts said.
SEC Closes in on Approving Ethereum ETF
Two days later, the SEC approved the rule changes, resulting in the first Ethereum-based ETF on the U.S. market. The fund won't hit the market right away, as the SEC must review each application in detail before approving it. This process could take several months, but the established precedent of a Bitcoin ETF means SEC approval may be expedited. This is a big move toward final approval, but it now seems like it's just a matter of time.
Crypto investors went wild over Standard Chartered Bank's prediction, sending the price of Ethereum up 23% the following day and Bitcoin up as much as 7%.
Forecasts and market reaction to ETF news
But the two biggest cryptocurrencies were largely unchanged on the actual ETF news: Ethereum has remained stable since Kendrick's prediction, while Bitcoin fell a few percent on Friday.
However, Kendrick's analysis still seems directionally correct. The combination of the ETF approval and the recent Bitcoin halving should help drive further price surges for Bitcoin, Ethereum, and many smaller altcoins over the next year or so. Growth investing star Cathie Wood of Ark Invest also has a longer-term goal in mind, setting a year-end Bitcoin target of around $150,000.
Evaluating Kendrick's analysis and its implications
From a simple logic standpoint, the idea that cryptocurrency prices will rise makes sense.
Bitcoin's market value is being boosted by both sides of the supply and demand equation. The halving of Bitcoin's mining rewards has made the newly minted digital coin harder to acquire. At the same time, the new ETFs open the door to near-direct Bitcoin investing by several new types of buyers. Retail investors can now access Bitcoin ETFs (and soon Ethereum ETFs) in their retirement accounts, while institutional investors can turn to familiar ETFs instead of opening new accounts at unsanctioned cryptocurrency exchanges.
Bitcoin is burning value on both ends and facing growing demand and tight supply constraints. This is causing the price to rise, especially since the process required to mine Bitcoin will no longer make economic sense unless the coin price rises to make up for the declining rewards.
And when Bitcoin moves, other cryptocurrencies tend to follow suit, with Ethereum in particular tending to follow Bitcoin's price charts very closely.
Ethereum Price Data by YCharts
Balancing your portfolio with cryptocurrency investments
Standard Chartered Bank's Ethereum target is 116% higher than the smart contract pioneer's current price (and 160% higher than where it was before Kendrick spoke to The Block). While we can't promise it will hit this target exactly, we are confident that Ethereum and Bitcoin will rise as the year progresses.
Of course, unexpected developments could sabotage the plans, or other unplanned events could send cryptocurrencies soaring even higher. In this young and volatile market, you never know what's going to happen until it happens.
Therefore, we do not recommend backing up your truck, literally staking the farm, or going too far with your cryptocurrency investments at this time. A diversified approach that places cryptocurrencies as a moderate part of a diversified portfolio will allow you to reap the benefits of rising prices without taking on too much risk. Ethereum looks like a solid buy today, but there is no need to wait impatiently for Kendrick's specific $8,000 target to materialize.
Anders Bylund has invested in Bitcoin and Ethereum. The Motley Fool has invested in and recommends Bitcoin and Ethereum. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.
