The price of Ethereum （ETH） may decline after the initial excitement surrounding spot Ethereum exchange-traded funds （ETFs） wears off, particularly if its supply continues to increase at the current rate.
Points
- Ethereum’s supply has been increasing by approximately 60,000 ETH per month since April.
- The novelty of spot Ethereum ETFs may wear off, impacting price.
- By December, ETH supply could revert to pre-Merge levels if current trends continue.
- Potential for ETH/BTC capitulation around September 2024.
- On-chain analysts highlight tight ETH supply despite increasing circulation.
Ethereum’s price might decline after the initial buzz surrounding spot Ethereum exchange-traded funds （ETFs） wears off if its supply continues to increase at the current rate, according to an analyst.
“If the supply of ETH keeps increasing by ~60k/month like it has been since April, then by December the supply will be back to what it was at the merge,” crypto trader and Into The Cryptoverse founder Benjamin Cowen wrote in a July 19 X post, referring to when the much-anticipated Merge transitioned Ethereum to its current proof-of-stake consensus model in September 2022.
Ethereum, which became deflationary after the Merge, saw its supply drop by approximately 455,000 ETH by April 2024.
Cointelegraph
However, since then, the supply has increased by around 150,000 ETH. Cowen claims that if it continues to increase at this rate, it might revert to what it was prior to the Merge happening over two years ago.
“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. “If it follows 2016, then ETH/BTC final capitulation will not start until September 2024, which would be enough time for the novelty of the spot ETF relative to BTC to potentially wear off,” he added.
Ether’s Price May Be Lower Than Its Current Price in September
While he believes that in 1.5 years the price of Ether will “likely be higher” than its current price, there is a “decent chance” that it declines within the next “3-6 months.” At the time of publication, Ether is trading at $3,507, according to CoinMarketCap data.
Meanwhile, just a few days prior, on-chain analyst Leon Waidmann pointed out that Ethereum is facing a “supply crisis.”
“Exchange balances down to 10.2% while 39.3% of ETH is locked in smart contracts,” Waidmann stated in a July 16 X post, claiming that most investors don’t realize “how tight” the ETH supply side is.
Five spot Ethereum exchange-traded funds （ETFs） will begin trading on the Chicago Board Options Exchange on July 23, “pending regulatory effectiveness,” CBOE announced on July 19.
On May 23, the United States Securities and Exchange Commission （SEC） approved rule changes permitting the listing of several spot Ether （ETH） ETFs.
The five spot Ether ETFs set to commence trading are the 21Shares Core Ethereum ETF, Fidelity Ethereum Fund, Invesco Galaxy Ethereum ETF, VanEck Ethereum ETF, and Franklin Ethereum ETF.
解説
- The potential for a decline in Ethereum’s price after the initial excitement of spot Ethereum ETFs wears off is a significant consideration for investors. The ongoing increase in ETH supply, if it continues at the current rate, could negate the deflationary benefits seen post-Merge and lead to a higher overall supply by December 2024.
- Analyst Benjamin Cowen’s insights into the supply trends and potential impact on ETH/BTC capitulation around September 2024 highlight the importance of monitoring supply dynamics. The possibility of ETH supply reverting to pre-Merge levels underscores the challenges in maintaining a deflationary asset.
- Despite the increasing supply, on-chain metrics indicate a tight supply side, with significant portions of ETH locked in smart contracts and low exchange balances. This tightness could mitigate some of the supply increase impacts, but investors should remain cautious.
- The launch of five spot Ethereum ETFs is a critical event, with the potential to attract significant investor interest and inflows. However, the long-term price impact will depend on sustained demand and the ability of the
market to absorb the increasing supply. As the novelty of the ETFs wears off, the price dynamics will likely stabilize, and fundamental factors such as supply and demand will play a more prominent role.
解説
- The analysis provided by Benjamin Cowen and Leon Waidmann offers valuable insights into the potential price trajectory of Ethereum. The increasing supply, despite the post-Merge deflationary trend, poses a challenge for maintaining the price levels seen after the initial excitement of spot Ethereum ETFs.
- The on-chain metrics indicating a tight supply side, with a significant portion of ETH locked in smart contracts, suggest that the immediate pressure on supply might be mitigated. However, the long-term implications of a steadily increasing supply need to be carefully monitored.
- The launch of spot Ethereum ETFs is expected to drive short-term interest and potentially boost prices. However, as the novelty fades, the market will need sustained demand to maintain or increase current price levels. Investors should consider the broader market trends and supply dynamics when making decisions.
- Overall, the potential for a price decline in Ethereum after the initial ETF excitement underscores the importance of a balanced approach to investing. By staying informed about supply trends and market responses, investors can better navigate the complexities of the cryptocurrency market.