Title: The Impact of Ethereum ETFs on ETH Price: Insights from Research Firm
Introduction:
In the near future, Ethereum-based ETFs that directly hold Ethereum (ETH) will be introduced in the United States. K33 Research, a cryptocurrency analysis firm, estimates that these ETFs will attract $4 billion in investments within the first five months of their launch. This article explores how the introduction of Ethereum Spot ETFs will potentially influence the price of ETH, based on insights from K33 analysts.
Institutional Demand for ETH:
K33’s estimate is based on the comparison of assets managed in existing ETH-based ETFs globally with similar Bitcoin (BTC) products, as well as the open interest (OI) in futures contracts on the Chicago Mercantile Exchange (CME), which is favored by institutional investors. Currently, Ethereum’s OI on the CME is 23% of the size of BTC futures. However, since the introduction of ETH futures trading on the CME in 2021, it has maintained an average share of 35% of BTC futures. This indicates a substantial institutional demand for ETH within the US market.
Estimated Inflows and Supply Squeeze:
By applying these rates to the approximately $14 billion inflows into spot BTC ETFs thus far, K33 estimates that ETH ETF inflows will range between $3 billion and $4.8 billion within the first five months. This estimate slightly surpasses JPMorgan’s projection of $3 billion for this year. According to the report, this would result in the accumulation of 800,000 to 1.26 million ETH within ETFs, representing approximately 0.7% to 1.05% of the total token supply. Consequently, this could create a supply squeeze for ETH, as issuers of spot ETFs will be required to purchase tokens on the spot market when investors buy ETF shares.
Expected Price Increase:
K33 Research’s senior analyst, Vetle Lunde, states that this significant supply absorption shock, similar to what was observed with BTC, is likely to drive an increase in the price of ETH. Bitcoin experienced record highs following the launch of US spot ETFs, with a nearly 60% surge. K33 analysts predict that the introduction of ETH ETFs will lead to ETH outperforming BTC after a two-and-a-half-year downtrend for the ETH-BTC pair.
Timing and Outlook:
Market observers anticipate that the ETH ETFs will commence trading around the end of June or early July, pending the completion of the necessary documentation. It is important to note that this article does not provide investment advice.
Conclusion:
The launch of Ethereum Spot ETFs in the US is expected to attract significant institutional investment, with an estimated $4 billion inflow within the first five months. This influx of funds could potentially lead to a supply squeeze for ETH, ultimately driving its price higher. K33 Research’s analysis suggests that ETH may outperform BTC in the near future, following the introduction of these ETFs. Investors and market participants will be closely monitoring the developments in this space as the launch of ETH ETFs draws near.
