ETH ETF Expected to Draw $4 Billion: Potential Price Surge Ahead

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• K33 Research forecasts $4 billion inflows into the ETH ETF within five months.
• ETH ETFs could lead to a supply crunch, boosting prices.

Future arrivals of Ethereum-based exchange-traded funds (ETFs) with direct ether holdings are expected to draw large inflows. Within the first five months after their introduction, crypto analytics company K33 Research projects that these ETFs might bring in $4 billion.

The basis for this upbeat forecast is comparisons with similar bitcoin (BTC) products, current ETH-based exchange-traded products globally, and the open interest (OI) in futures contracts on the Chicago Mercantile Exchange (CME).

Institutional Demand for Ethereum 

Ether futures open interest on CME is currently 23% of BTC futures. ETH futures have, however, averaged 35% of the BTC futures market since they started trading on CME in 2021. This suggests that ETH has a strong institutional demand in the United States, according to K33 Research.

Markets remain rangebound with low volatility, but moderate ETH ETF excitement is reflected in trader positioning.

A relatively quiet week, but we expect the inevitable ETH ETF launch to follow a similar (explosive) path to Bitcoin's.https://t.co/nXd89cthCb

— K33 Research (@K33Research) June 4, 2024

By applying these ratios to the almost $14 billion in inflows observed in spot BTC ETFs, K33 Research anticipated that ETH ETF inflows during the first five months will range from $3 billion to $4.8 billion. This estimate is higher than the $3 billion JPMorgan projected for the same time frame.

Supply Crunch and Price Impact

The anticipated inflows would amount to 800,000 to 1.26 million Ethereum accumulated in the ETFs at current prices, which are about $3,801.97 according to CoinMarketCap.

This sum equates to between 0.7% and 1.05% of the entire token supply, which could cause a supply shortage. The issuers of spot ETFs have to buy tokens in the spot market as investors buy ETF shares, unlike futures-based products.

“As in BTC, this monumental supply absorption shock should lead to price appreciation in ETH,” said Vetle Lunde, senior analyst at K33 Research. The present upward trend in ETH prices—which have climbed by 0.75% in the last 24 hours and 0.43% over the last week—supports this view.

Furthermore, ETHNews has highlighted how Ethereum ETFs might set off an altcoin season (altseason).