Is ETH becoming the Democratic Party’s cryptocurrency? Political and economic factors may drive its rise

Original author: goodalexander, crypto analyst

Original translation: TechFlow

I am bullish on Ethereum. I think the current expectations for ETFs do not reflect the potential demand from family offices and Blackrock ESG/European clients who want to expand data centers globally to deal with the carbon footprint management issues brought about by AI.

Current ETH/BTC chart

The above chart shows the long-term trend of ETHBTC

· ETH/BTC has been in a state of heavy selling since the ICO craze in 2021. At that time, the low point of ETHBTC was about 0.052.

· ETH/BTC attempted to break out of the descending trend channel on the news of the ETF launch, but failed as IBIT continued to see accelerated inflows while Trump and other prominent politicians announced their support for Bitcoin.

· If ETH/BTC breaks above 0.056, analysts will likely interpret the success of the launch based on price action rather than focusing on the "flow" number, as people actually care about the price.

· There is an article in Bloomberg that mentions that ETH/BTC could "jump 90%" after the ETF approval. If true, this would take ETHBTC above the 2021 ICO highs. I am skeptical of this claim that relies on ETH's sensitivity to BTC, but I do think ETHBTC can reach 0.07.

· At current BTC prices, this is equivalent to about $4,600 ETH/USD.

Expectations and flows

Regarding flow expectations. Citi expects $6 billion, Wintermute expects $4 billion, and Bloomberg expects 10-15% of Bitcoin flows. Assuming $25 billion in Bitcoin flows in the first year, the upper limit is $3.75 billion, but analysts currently interpret the flow level as $2 billion. I think it's safe to say that $4 billion is the target for annual inflow expectations.

IBIT, the Ishares Bitcoin ETF currently has $22.7 billion in assets - compared to the Ishares Silver ETF which has only $13.2 billion despite only being around for half a year. The silver market is worth $1.7 trillion, while the Bitcoin market is worth $1.3 trillion, despite Bitcoin having more liquidity, interest, and assets under management. If Judas knew about the Bitcoin Standard, we would be trading much higher. To be honest, Bitcoin's global liquidity makes it much more liquid than the New Zealand dollar (a G10 currency), which greatly increases its properties as a currency. With these factors in mind, it is quite plausible that Bitcoin would surpass silver, which would give us a ~30-40% upside from current prices.

People have been bullish since May since ETH ETF approval

IBIT proves the importance of crypto ETFs, but people have been bullish on ETHE since May and are tired of the aggressive rise in SOLETH transactions, which generally generates more fees than the ETH chain.

But ordinary investors don't know SOLETH, the question is how will the interest in pure ETH perform compared to the BTC ETF.

According to Google Trends, we can expect to reach 20-30% of the total interest.

The above chart shows recent Google Trends, thinking we can realistically reach 20-30% of total interest (or even higher if ETH really rises, as we saw in May when it was approved).

Internal Data Tracking (Network Traffic, Related Terms)

As Ethereum (ETH) has more use cases, its associated "narrative" potential is also greater. Internal data tracking shows that the reasonable range of ETH penetration on the general investor side is between 20-60%, which mainly depends on the use case.

Dig deeper into why this number can be so high - there are many applications built on Ethereum. During the NFT bull run, data tracking for ETHBTC reached 60%.

Finally, use the Claude API to perform a quick simulation to estimate the market value ratio of Ethereum and Bitcoin.

The answer converges very consistently to 45% over 10 runs. This would be the high end estimate. Note that the current ETHBTC market cap is ~32%.

So basically - I think IBIT could be worth $30 billion by year end. The low end estimate for ETH is 20%, which would give it a market cap of $6 billion, which is Citi's "aggressive" high end estimate. So even from the average investor data tracking, I think expectations are low enough that ETH is still investable even with the poor performance in the first few days - which brings us to

The intricacies

Trump to speak at Bitcoin conference

Trump will be speaking at the Bitcoin conference along with Snowden, Russell Brand, Cathie Wood, Michael Saylor, and others. Even if these people are not directly associated with Trump, some of them may make institutional investors uneasy. Many Republican senators will also be speaking at the Bitcoin conference.

So - on one hand, this conference may reduce interest in ETH, which is bearish in the short term.

But on the positive side, this conference may turn Bitcoin into a right-wing asset - which is bullish for ETH from a fund flow perspective.

Harris’s Rise and the Politicization of Bitcoin

Trump’s odds have fallen since Harris “took over” Biden’s affairs, trading from a high of 70 on Predictit to a current 59, one of Trump’s highest levels ever in the odds market.

The New York Times on Kamala Harris: “When Ms. Harris ran for president in 2020, her climate plan called for $10 trillion in additional spending over a decade and a price on carbon, with the proceeds going directly back to households. Economists say a carbon tax is the most effective way to get industry to reduce pollution.”

She also supports a ban on fracking, which Biden opposes. Fracking is a technique in which water and chemicals are injected underground at high pressure to extract hard-to-reach oil or gas.

Logically, Harris has a significant impact on both expanding deficits and reducing energy consumption, which is very bad for the Bitcoin mining business.

Institutional Energy Narrative

This provides the basis for the key bullish case for Ethereum. Bitcoin is very power hungry. If fracking were banned as Harris advocates (which Biden does not support), this could put a huge strain on the energy grid. While you can make an argument for using renewable energy, most institutions don't agree. Remember, it's not the facts that matter, it's the perceptions that matter.

Goldman Sachs Expects AI to Dramatically Increase Electricity Demand

Goldman's chart predicts trillions of dollars in capital expenditures, with $1 trillion needed in Europe alone to deal with electricity costs.

Add to that the stagnation of Bitcoin hash rate quarter-over-quarter growth after the halving, and you have a nice narrative. Miners are essentially shorting the price of electricity, which could make Bitcoin less secure over time, and could also force them to sell their holdings to cover the increasing costs of electricity. This also explains their expansion into the AI data center business.

Bitcoin Hashrate 84-Day Moving Average Percent Change (Note - Hashrate has recently started to recover, which is good for BTC)

Meanwhile, since Ethereum merged to Proof of Stake, the supply of Ethereum has decreased slightly, as shown in the chart below.

This chart is key to proving that Ethereum Proof of Stake can generate a "scarce" asset without consuming electricity. Ideally, we would like this chart to trend down rather than remain flat, but this is the reality.

This is not a completely new idea, and Soros fund manager Dawn Fitpatrick has also expressed this view.

Finally, it is worth pointing out that Blackrock has been talking about climate issues for the past 3 years. It has a large European asset base.

Conclusion

I think over the next few weeks the media will heavily promote Kamala Harris and increasingly focus on her $10 trillion climate plan, her call to ban fracking, and the focus on AI and its associated electricity costs. Because these narratives will influence institutional mindset, and Blackrock is well-positioned from a marketing perspective - I think ETH will become the "Democratic crypto". ETH will receive inflows from those "climate-sensitive" institutions - many of which are hostile to Donald Trump, but also see the political inevitability of large-scale climate investments requiring quantitative easing and currency debasement.

Furthermore, these large institutional flows are most likely to occur as ETFs themselves reduce the risk of custodying assets. The above is my opinion (disclosure: I own ETH and this is not investment advice).

Original link

欢迎加入律动 BlockBeats 官方社群：

Telegram 订阅群： https://t.me/theblockbeats

Telegram 交流群： https://t.me/BlockBeats_App

Twitter 官方账号： https://twitter.com/BlockBeatsAsia