The imminent launch of Ethereum-based exchange-traded funds (ETFs) in the U.S., which can directly hold ether (ETH), is expected to substantially affect the cryptocurrency market. According to a recent report by crypto analytics firm K33 Research, these ETFs could attract up to $4 billion in inflows within the first five months of their introduction.
K33 Research’s forecast is grounded in a comparative analysis of the assets under management (AUM) in existing ETH-based exchange-traded products globally versus similar bitcoin (BTC) products and the open interest (OI) in ETH futures contracts on the Chicago Mercantile Exchange (CME).
Key Findings
– Ether’s OI on CME: Currently at 23% of BTC futures, though it has averaged 35% since ETH futures began trading in 2021, indicating robust institutional demand for ETH in the U.S.
– Potential Inflows: By applying these ratios to the nearly $14 billion inflows into spot BTC ETFs, K33 estimates that ETH ETFs could see inflows between $3 billion and $4.8 billion within the first five months. This surpasses JPMorgan’s forecast of $3 billion for this year.
– Supply Absorption: Based on current prices, this influx would equate to 800,000 to 1.26 million ETH, or roughly 0.7%-1.05% of the total ETH supply, potentially creating a supply crunch and driving up prices.
Institutional Demand and Market Impact
The significant institutional demand for ETH, reflected in the futures market data from CME, underlines the potential for substantial inflows into ETH ETFs. Unlike futures-based products, spot ETFs require issuers to purchase actual tokens in the spot market, which can lead to notable supply absorption.
Potential Price Impact
Bitcoin saw a nearly 60% rally to record highs following the introduction of U.S. spot ETFs, despite an initial correction. K33 analysts predict that ETH could outperform BTC following the launch of ETH ETFs, marking a reversal of the downtrend in the ETH-BTC pair observed over the past two and a half years.
The U.S. Securities and Exchange Commission (SEC) has already approved key filings for spot ETH ETFs, surprising many market participants. This approval sets the stage for the ETFs to begin trading in the U.S. in late June or early July.
The introduction of Ethereum-based ETFs is expected to drive significant capital inflows and create a supply crunch, potentially leading to price appreciation for ETH. As institutional investors increase their exposure to ETH through these ETFs, the market is likely to experience enhanced liquidity and increased investor interest, reinforcing the bullish sentiment around Ethereum.
