Andrew Kang Ethereum is not Nvidia Weak Fundamentals Resemble Intel
Venture capital firm Mechanism’s co-founder, Andrew Kang, pointed out in an article that the potential for Ethereum ETF to rise is limited. In the long term, Ethereum is more like a declining Intel rather than Nvidia or Amazon.
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Limited Upside for Ethereum ETF
I. ETH Has Followed BTC’s Rise
II. Bitcoin Spot ETF Net Inflows are Overstated
III. ETH’s Transaction Volume is Only 15% of BTC’s
Ethereum is Like Intel, Not Nvidia or Amazon
On-chain Activity is Shifting to Major Public Chains
Limited Upside for Ethereum ETF
I. ETH Has Followed BTC’s Rise
Andrew Kang mentioned that when he submitted a Bitcoin ETF application at BlackRock, he publicly predicted a significant rise in Bitcoin. Since then, Bitcoin has increased by 2.6 times, and Ethereum has increased by about 2.1 times.
From the bottom of the cycle, both BTC and ETH have already risen by about four times. So, even if Ethereum ETF is successfully launched, is there still room for further growth? He believes that unless there is a significant improvement in Ethereum’s fundamentals, he does not expect significant price increases.
II. Bitcoin Spot ETF Net Inflows are Overstated
He then pointed out that the asset under management for Bitcoin ETF has reached $50 billion, with a net inflow of $14.5 billion since its launch. However, this does not represent the real cash flow as it needs to deduct the neutral inflows from arbitrage trading and spot conversion.
He estimates that about $4.5 billion of net inflow is from arbitrage trading, and large holders like BlockOne have also converted a significant amount of BTC into ETF, which is about $5 billion. Therefore, the actual net inflow for Bitcoin ETF is only $5 billion.
III. ETH’s Transaction Volume is Only 15% of BTC’s
Bloomberg ETF analyst Eric Balchunas has estimated that ETH’s transaction volume may be only 10% of BTC’s. Based on the inference from the second point, the net inflow for ETH spot ETF after six months of listing is about $1.5 billion, and the actual net inflow is about $500 million.
Andrew Kang predicts that the actual net inflow for ETH will be around 15% of BTC’s, and the familiarity with ETH in the crypto space may lead to higher expectations for Ethereum ETF than traditional retail investors. Compared to BTC, the public may not be as enthusiastic about ETH.
He believes that after the launch of Ethereum ETF, the price will drop to $2,400 to $3,000.
Ethereum is Like Intel, Not Nvidia or Amazon
After analyzing the limited upside for Ethereum ETF, Andrew Kang further criticized the price trend and fundamentals of Ethereum. Ethereum is often seen as a tech stock, and he believes that ETH’s trajectory is similar to the declining Intel and Cisco:
With growth limitations, slowing innovation, and competition for market share, Intel has experienced several bubbles in the past. This affects investors’ willingness to invest. How can you sell a company with a market value of $420 billion (Ethereum) and a P/E ratio of 200x, with negative revenue growth? Cryptocurrency enthusiasts might buy it, but given the current fundamentals, it’s a delusion to believe that traditional finance will inject a significant amount of capital.
Monthly Chart for Intel
Monthly Chart for ETH/BTC
On-chain Activity is Shifting to Major Public Chains
Andrew Kang concludes:
Believing that Ethereum is following the path of Nvidia or Amazon is wishful thinking. These companies have convincing year-over-year growth plans and historical revenue growth, while Ethereum is the opposite. NFTs are dying, on-chain transactions are shifting to other chains, and on-chain fees are decreasing. This is a typical bubble peak that occurs in every cycle.
Andrew Kang
Cisco
ETF
Intel
Ethereum
Nvidia
Bitcoin
Further Reading
Cryptocurrency Market Faces Selling Pressure: Outflows from Spot ETFs, Decreased Reserve by Mining Firms, Government Agency Sell-offs
Standard Chartered Bank Plans to Launch Bitcoin and Ethereum Trading Platform: Actively Supporting Customer Demand.
