The launch of spot Ethereum ETF may result in a supply crunch at launch, says crypto accounting software company Integral June 3.
The projection reflects the sentiment surrounding spot Bitcoin ETFs before their launch earlier this year. The ETFs tied to the flagship crypto have since experienced record inflows, with BTC supply on centralized exchanges falling significantly.
Ethereum supply is tight
Integral expects that ETF issuers will buy and hold large amounts of ETH, which will remove some ETH from the open markets and increase the price of the crypto.
The trend is probably already underway. Integral quoted crypto entrepreneur Oliver Isaacs, who revealed that More than $3 billion worth of ETH had left exchanges since the SEC approved spot approval of ETH on May 23, leaving ETH exchange reserves at a six-year low.
Integral said that separate staking trends will intensify the supply crisis and noted that approximately 25% of ETH supply is currently staked. ETF issuers will not directly participate in staking, but staking participants can benefit from rising prices, the company said.
Furthermore, Integral believes that approvals will increase institutional adoption of ETH and validate crypto as a legitimate asset class. Additionally, it said approvals could trigger an “altcoin season” as demand for ETH spills over to other cryptos.
Spot ETH ETFs are expected to launch in the coming weeks or months.
IBIT is responsible for 25% of BlackRock flows
Many are waiting to see if Ethereum will follow Bitcoin’s trend after ETFs tied to the flagship crypto began trading in January.
The Newborn Nine spot Bitcoin ETFs have cemented Bitcoin as a viable investment option in the traditional financial sector, as evidenced by their staggering and sustained growth. BlackRock and Fidelity’s IBIT and FBTC stand out in particular, following a record streak of inflows in ETF history.
The two funds are now responsible for a significant portion of the total ETF flows for both asset managers.
Bloomberg ETF analyst Eric Balchunas said BlackRock’s IBIT was good 26% of the company’s $65 billion ETF inflows since the beginning of the year. Notably, BlackRock is the largest ETF issuer in the US, with 429 exchange-traded funds to its name.
IBIT has recorded total inflows of $16.7 billion since its launch.
Meanwhile, Fidelity’s rival FBTC fund is responsible for 56% of total ETF flows worth $15.8 billion this year. FBTC has seen total inflows of $8.9 billion so far.
Fidelity has launched and manages 70 ETFs.
Balchunas data shows that BlackRock and Fidelity are the second and fifth largest ETF issuers, based on annual figures. The two companies rank first and second when looking exclusively at companies that have launched a spot Bitcoin ETF.