Ethereum ETF: Spark for the ETH Price?

Ethereum ETF: Spark for the ETH Price?

As the potential launch of the Ethereum ETF approaches, speculation is rife about its impact on the ETH price. An analysis of the situation follows.

The SEC's approval of ETH ETFs caught many market participants off guard, leading to a reevaluation of ETH's value. The sudden price surge following the news correlated with massive inflows, as shown in the chart from CryptoQuant. On a single day, more than 100,000 ETH were purchased by long-term holders, the largest value since September 2023. This marks a clear turning point for the ETH price, which had seen little growth in recent months.

Demand and Supply Dynamics After the ETF Launch

The key factor influencing the performance of Ethereum after the ETF launch is the dynamic between demand and supply. According to expert estimates from Goldman Sachs, Grayscale, Bitwise, and Bloomberg, Ethereum could attract between 10% and 50% of the Bitcoin ETF inflows. This would result in up to $7 billion flowing into ETH within four months.

Although the ETH ETFs may see less demand, their impact on the price could be stronger. This is due to ETH's lower market capitalization (approximately 33% of Bitcoin's) and the potential for the price per coin to rise more sharply with each billion dollars of inflow.

Grayscale's report also suggests that around 50% of the ETH supply is illiquid, either due to staking or being locked in smart contracts. If institutional investors encounter this limited coin supply, further upward pressure on the price could ensue.

Disclaimer: All content presented in this article is for informational purposes only and does not constitute investment advice or recommendations.

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