Key Points
- Ethereum (ETH) is undervalued compared to Bitcoin (BTC), says Lekker Capital’s Quinn Thompson.
- Approval of an ETH ETF could attract significant capital inflows, potentially impacting the ETHBTC ratio.
Quinn Thompson, founder of Lekker Capital, has suggested that Ethereum (ETH) is greatly undervalued when compared to Bitcoin (BTC).
ETH ETF Approval and Potential Impact
Thompson bases his assertion on the recent developments regarding potential approval of an ETH ETF and the expected capital inflows this could bring. He believes that the current ETHBTC ratio of 0.05 is still underpriced, particularly in the current bull market.
The ETHBTC ratio is a measure of ETH’s performance in relation to BTC. An increase in the ratio indicates that ETH is outperforming BTC, while a decrease suggests BTC is outperforming ETH. The ratio fell to 0.45 on May 16th, but has since recovered to above 0.50 following news of possible ETH ETF approval.
Thompson argues that the absence of ETFs has hindered ETH from attracting sufficient flows, with the market attention primarily focused on BTC and Solana (SOL).
Mixed Views on ETH ETFs
However, opinions vary on whether ETH ETFs will follow the path of BTC ETFs. For instance, the Grayscale Bitcoin Trust (GBTC) experienced about $17 billion in cumulative outflows after its conversion to an ETF in January. It raises the question of whether a similar fate awaits the Grayscale Ethereum Trust (ETHE), potentially impacting ETH’s upside potential.
Crypto analyst James Van Straten has expressed uncertainty about the potential outcome. He suggested that the proposed Grayscale Mini Trust (ETH) could help mitigate issues such as fees that led to substantial outflows in GBTC.
Thompson, on the other hand, estimates that ETH could attract about 9% of inflows from spot BTC ETFs in the first four months following approval. This could increase the ETHBTC ratio from its current 0.53, boosting the value of ETH.
Geoff Kendrick, head of Digital Assets Research at Standard Chartered, shares a similar bullish view on ETH post-ETF. He believes that ETH ETFs could attract between $15 billion and $45 billion in inflows in the first 12 months. However, whether ETH will outperform BTC post-ETF launch remains to be seen. The market is currently awaiting the SEC’s decision on VanEck’s ETH ETF application, due on May 23rd.
