Surge in ETH Supply Overshadows Excitement for Spot Ethereum ETF
HIGHLIGHTS
- Ethereum’s supply has increased by 60,000 ETH monthly since April 2024.
- Analysts suggest the final capitulation for the ETH/BTC trading pair could start in September 2024.
- Approval of the spot Ethereum ETF may mitigate some of the supply entering the market.
We are nearing the approval of the spot Ethereum ETF in just three days, generating considerable excitement among investors. However, a rapid increase in ETH supply over the past two months poses a significant concern moving forward.
ETH Supply Growth at 60K Per Month
According to market analyst Benjamin Cowen, Ethereum’s supply has been growing by 60,000 ETH monthly since April. He noted that if this trend persists until December, the circulating ETH supply will resemble levels seen before the Merge event in September 2022.
In the past three months alone, Ethereum’s supply has surged by 150,000 ETH. “Currently, post-Merge, the supply stands at -298,000. At this rate, it will take only five months to revert,” Cowen remarked.
Cowen emphasized that Ethereum’s price surge ahead will largely hinge on monetary policy. He believes significant upward movement is unlikely unless the Federal Reserve shifts to quantitative easing.
Regarding the ETH/BTC trading pair, Cowen drew parallels with historical patterns, suggesting that final capitulation may not commence until September 2024. This timeline aligns with previous cycles where ETH/BTC broke support around the same time as Fed rate cuts.
Cowen also highlighted historical charts, pointing out that the ETH/BTC pair hit lows in August but rallied substantially in September. He anticipates a potential repeat of this pattern.
Will the Spot Ethereum ETF Absorb Supply?
With the imminent launch of the spot Ethereum ETF next week, investors anticipate robust inflows. Major issuers like BlackRock, Fidelity, and Grayscale have already disclosed their fee structures.
While many analysts foresee multi-billion dollar inflows into Ethereum ETFs by year-end, immediate post-approval inflows may be tempered by a potential “sell-the-news” event.
