Ethereum Spot ETFs Expected to Attract $4 Billion in Inflows, Creating Potential Supply Shortage
Cryptocurrency analysis firm K33 Research predicts that Ethereum-based Exchange-Traded Funds (ETFs) capable of directly holding Ethereum (ETH) are poised to launch in the U.S. soon. These ETFs could attract up to $4 billion in inflows within the first five months, potentially creating a supply shortage for ETH.
Significant Inflows Anticipated
K33 Research’s report highlights that the anticipated inflows for Ethereum ETFs are based on a comparative analysis of global existing Ethereum-based exchange-traded products and similar Bitcoin (BTC) products. The firm also considered the open interest (OI) on the Chicago Mercantile Exchange (CME) futures contracts, a preferred market for institutional investors.
K33’s data shows that the current OI for Ethereum on CME is 23% of BTC futures. However, since the introduction of ETH futures on CME in 2021, its average share has been 35% of BTC futures, indicating strong demand for ETH among U.S. institutions.
Projected Inflows and Market Impact
Comparing these ratios with the nearly $14 billion inflows into spot Bitcoin ETFs to date, K33 estimates that Ethereum ETFs could see inflows between $3 billion and $4.8 billion in the first five months. This prediction slightly surpasses JPMorgan’s forecast of $3 billion for this year.
The report suggests that at current prices, this would equate to accumulating between 800,000 and 1.26 million ETH within the ETFs, representing approximately 0.7% to 1.05% of the total token supply. Unlike futures-based products, spot ETF issuers need to purchase tokens directly from the spot market when investors buy ETF shares, potentially causing a supply crunch.
Analyst Insights and Market Reactions
Vetle Lunde, a senior analyst at K33 Research, stated:
“As seen with BTC, such a significant supply absorption shock is likely to drive up the price of ETH.”
Bitcoin experienced a nearly 60% rebound and reached an all-time high after the initial pullback at the end of January following the launch of U.S. spot ETFs. K33 analysts predict that with the launch of Ethereum ETFs, the ETH-BTC currency pair will start outperforming BTC after nearly two and a half years of decline.
Launch Expectations
Market observers expect that these Ethereum ETFs could begin trading as early as late June or early July, potentially marking a significant milestone for ETH and the broader cryptocurrency market.
The anticipated launch of Ethereum spot ETFs in the U.S. could draw substantial institutional investment, potentially leading to a supply shortage and price surge for ETH. With projected inflows of up to $4 billion within the first five months, these ETFs are expected to significantly impact the ETH market, possibly driving its price higher and ending the ETH-BTC downtrend.
