News
1 The leading cryptocurrency will rise by 116%, according to Standard Chartered. Is it a purchase?
An analyst at Standard Chartered predicts Ethereum will more than double by the end of the year. Here’s how the bullish analysis plays out and how it moved the markets this week.
Analysts from a large British bank say so Ethereum (ET 0.02%) is expected to more than double between now and the end of 2024. Does this projection make sense?
Bullish Ethereum Analysis by Standard Chartered
Geoff Kendrick, Head of Cryptocurrency and Emerging Markets Research at Standard charter (OTC: SCBF.F), set a year-end price target of $8,000 Ethereum (ET 0.02%) earlier this week.
Speaking to cryptocurrency news site The Block on Tuesday, Kendrick predicted that the U.S. Securities and Exchange Commission (SEC) will approve the first exchange-traded funds (ETF) monitoring The spot price of Ethereum. He argued that the approval would inspire large inflows of money into the Ethereum cryptocurrency, similar to the inflows that followed the approval of Spot Bitcoin ETF in January.
The analyst also emphasized that he correctly defined the money flow effects of the Bitcoin ETF approval and underlined the long-term price increases that are expected to result from these substantial investment moves.
Mind you, Kendrick based his Ethereum price target on his latest Bitcoin (Bitcoin 0.47%) target. In other words, Ethereum ETFs seem like good news to him for the cryptocurrency market as a whole, not necessarily pushing Ethereum prices faster than the rest of the industry. 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 the end of 2024, this would imply an $8,000 level for Ether,” the Standard Chartered analyst said.
SEC Gets Closer to Approving Ethereum ETFs
Two days later, the SEC approved a rule change that will lead to the first Ethereum-based ETFs on American markets. The funds won’t hit the market right away, as the SEC has to review each request in detail before approving anything. While this process could take months, the established precedent of Bitcoin ETFs suggests that SEC approval could be expedited. It’s still a big step towards final approvals, which now seem like a matter of time.
Cryptocurrency investors were thrilled with Standard Chartered’s forecast, which sent the price of Ethereum up 23% the next day while Bitcoin rose as much as 7%.
Market reactions to ETF forecasts and news
However, the two largest cryptocurrencies barely moved on the actual ETF news. Ethereum held steady versus Kendrick’s forecast, and Bitcoin fell a couple of percentage points on Friday.
But Kendrick’s analysis still seems directionally correct. The combination of ETF approvals and the recent halving of Bitcoin should actually fuel another surge in prices for Bitcoin, Ethereum, and many others smaller altcoins over the next year or so. Rising investing star Cathie Wood from Ark Invest also set its year-end Bitcoin target at around $150,000, with much more ambitious long-term goals in mind.
Evaluate Kendrick’s analysis and its implications
From a logical point of view, the idea of rising cryptocurrency prices makes sense.
Bitcoin’s market value is receiving increases from both sides the calculation of supply and demand. Halving Bitcoin mining rewards makes it harder to get freshly minted digital coins. At the same time, the new ETFs open the door to almost direct investments in Bitcoin by several new types of buyers: retail investors can now access Bitcoin ETFs (and soon Ethereum ETFs) in their retirement accounts, while asset managers Institutional financial institutions can rely on familiar tools. ETFs instead of opening new accounts at unapproved cryptocurrency exchanges.
Burning the value candle at both ends, Bitcoin is experiencing higher demand and tightly limited supply. This is a recipe for higher prices, especially as the necessary Bitcoin mining process stops making economic sense unless coin prices rise enough to offset the smaller rewards.
And where Bitcoin goes, other cryptocurrencies tend to follow. Notably, Ethereum tends to follow Bitcoin’s price chart quite closely:
Ethereum price data of YCharts
Balancing your portfolio with cryptocurrency investments
Standard Chartered’s Ethereum target is 116% above the smart contract pioneer’s current price (and 160% above the level it was at before Kendrick spoke to The Block). I can’t promise that it will reach this exact goal, but I am convinced that both Ethereum and Bitcoin will rise over the course of the year.
Of course, unexpected twists can throw a spanner in the works, and other unplanned events could instead push cryptocurrencies even higher. You never really know what will happen in this young and volatile market until it happens.
Therefore, I would not recommend backing down, betting on the literal farm, or going overboard with cryptocurrency investing at this time. A diversified approach with Cryptocurrencies play a modest role in a diversified portfolio will allow you to enjoy the benefits of a price increase without risking everything. Ethereum looks like a solid buy today, but I wouldn’t hold my breath waiting for Kendrick’s specific $8,000 target to materialize.
Anders Bylund has positions in Bitcoin and Ethereum. The Motley Fool has positions and recommends Bitcoin and Ethereum. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.