Ethereum’s price might decline after the initial buzz surrounding spot Ethereum ETFs wears off, due to a steady increase in ETH supply.
Points
- Ethereum’s price may dip after the initial excitement of spot ETFs fades.
- ETH supply has been increasing by around 60,000 per month since April.
- If this trend continues, the supply will revert to pre-Merge levels by December.
- Analyst Benjamin Cowen highlights the potential impact of increasing supply on ETH’s price.
Ethereum’s price might decline after the initial buzz surrounding the launch of spot Ethereum exchange-traded funds （ETFs） wears off, according to analysts. The key concern is the steady increase in ETH supply, which has been growing by approximately 60,000 ETH per month since April. If this trend continues, Ethereum’s supply will revert to pre-Merge levels by December.
Crypto trader and Into The Cryptoverse founder Benjamin Cowen noted that since the much-anticipated Merge in September 2022, Ethereum transitioned to a proof-of-stake consensus model, which initially made the cryptocurrency deflationary. By April 2024, ETH’s supply had decreased by approximately 455,000 ETH. However, since then, the supply has increased by around 150,000 ETH.
“If the supply of ETH keeps increasing at 60,000 ETH per month, then we will see the supply revert to what it was back at the Merge,” Cowen stated. He also suggested that if this pattern follows historical trends, ETH/BTC final capitulation might not start until September 2024, giving enough time for the novelty of the spot ETF to wear off.
Cowen believes that while Ethereum’s price might be higher in 1.5 years than it is currently, there is a decent chance of a decline within the next 3-6 months. At the time of publication, Ether is trading at $3,507, according to CoinMarketCap data.
On the other hand, on-chain analyst Leon Waidmann pointed out a “supply crisis” facing Ethereum. He highlighted that exchange balances have dropped to 10.2
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%, while 39.3% of ETH is locked in smart contracts. This significant reduction in exchange balances suggests that many investors are holding onto their Ethereum, potentially reducing the immediate sell pressure.
Moreover, five spot Ethereum ETFs are set to begin trading on the Chicago Board Options Exchange （CBOE） on July 23, “pending regulatory effectiveness.” These ETFs include the 21Shares Core Ethereum ETF, Fidelity Ethereum Fund, Invesco Galaxy Ethereum ETF, VanEck Ethereum ETF, and Franklin Ethereum ETF. The approval and launch of these ETFs could attract new investors and boost demand for Ethereum in the short term.
However, the increasing supply remains a critical factor to watch. If the supply continues to grow at the current rate, it could offset the positive impact of the ETFs and lead to a decline in Ethereum’s price once the initial excitement wears off.
解説
- Ethereum’s price faces potential downward pressure due to the steady increase in supply since April, which may counteract the positive impact of spot ETFs.
- Analyst Benjamin Cowen suggests that the ETH supply could revert to pre-Merge levels by December if the current trend continues.
- The launch of five spot Ethereum ETFs on the Chicago Board Options Exchange （CBOE） could temporarily boost demand and attract new investors.
- On-chain data indicates a significant reduction in exchange balances, with a large percentage of ETH locked in smart contracts, potentially reducing immediate sell pressure.
- Investors should monitor the supply dynamics and market sentiment closely, as the increasing supply could impact Ethereum’s price in the coming months.