The launch of a spot Ethereum ETF is likely to cause supply shortages when it launches on June 3, according to cryptocurrency accounting software company Integral.
This forecast reflects sentiment toward the spot Bitcoin ETF prior to its launch earlier this year. ETFs linked to major cryptocurrencies have since experienced record inflows, while BTC supply on centralized exchanges has also declined at the same time.
Ethereum supply crisis
Integral expects ETF issuers to purchase and hold large amounts of ETH, removing a portion of ETH from the public markets and driving up the price of the cryptocurrency.
This trend is already underway. Integral quotes cryptocurrency entrepreneur Oliver Isaacs: revealed it More than $3 billion of ETH has left exchanges since the SEC approved spot ETH on May 23. This dropped ETH exchange holdings to the lowest level in six years.
Integral said a separate staking trend would intensify the supply crunch, noting that about 25% of ETH supply is currently staked. ETF issuers will not directly participate in staking, but staking participants can benefit from price appreciation, the company said.
Additionally, Integral believes that approval will increase institutional adoption of ETH and validate the cryptocurrency as a legitimate asset class. Moreover, the approval could trigger an “altcoin season” as demand for ETH flows into other cryptocurrencies, he said.
A spot ETH ETF is expected to launch in the coming weeks and months.
IBIT accounts for 25% of BlackRock flows.
Many are waiting to see whether Ethereum will follow the trend set by Bitcoin after an ETF linked to the flagship cryptocurrency began trading in January.
The newborn Nine Spot Bitcoin ETF has solidified Bitcoin as a viable investment option in the traditional financial industry, as evidenced by Bitcoin’s incredible and sustained growth. BlackRock and Fidelity’s IBIT and FBTC stand out in particular, continuing record-breaking inflows in ETF history.
The two funds now account for a significant portion of both asset managers’ overall ETF flows.
Bloomberg ETF analyst Eric Balchunas said BlackRock’s IBITs have accounted for 26% of the company’s $65 billion ETF inflows since the beginning of the year. In particular, BlackRock is the largest ETF issuer in the United States, owning 429 exchange-traded funds.
IBIT has seen total inflows of $16.7 billion since its launch.
Meanwhile, Fidelity’s competing FBTC fund accounts for 56% of total ETF flows of $15.8 billion this year. FBTC has recorded total inflows of $8.9 billion to date.
Fidelity launches and manages 70 ETFs.
BlackRock and Fidelity are the second and fifth largest ETF issuers based on annual flows, according to data from Balchunas. The two companies ranked first and second when only considering companies that launched spot Bitcoin ETFs.