The long-awaited arrival of Ethereum-based exchange-traded funds (ETFs) that can directly hold Ethereum (ETH) is just around the corner in the United States.
According to a report by crypto analytics firm K33 Research, these ETFs could attract an impressive $4 billion in inflows within the first five months of their launch. The report reads:
Markets remain rangebound with low volatility, but moderate ETH ETF excitement is reflected in trader positioning.”
K33 Research based its forecast on a comparison of assets under management in existing ETH-based exchange-traded products (ETPs) worldwide and similar Bitcoin (BTC) products. The report also considers the open interest (OI) in futures contracts on the Chicago Mercantile Exchange (CME), a popular marketplace for institutional investors.
Currently, Ethereum’s OI on CME stands at 23% of the size of BTC futures. However, since the introduction of ETH futures on CME in 2021, it has maintained an average share of 35% of BTC futures, indicating a significant institutional demand for ETH in the U.S.
A healthy capital injection
Applying these ratios to the nearly $14 billion inflows into spot BTC ETFs so far, K33 estimates that ETH ETF inflows could range between $3 billion and $4.8 billion within the first five months. This is slightly higher than JPMorgan’s $3 billion forecast for this year.
Based on current prices, this inflow would equate to the accumulation of 800,000 to 1.26 million ETH in the ETFs, representing roughly 0.7% to 1.05% of the total token supply. As spot ETF issuers will need to purchase tokens in the spot market when investors buy ETF shares, this could create a supply crunch for the asset.
Vetle Lunde, senior analyst at K33 Research, believes that this “monumental supply absorption shock should lead to price appreciation in ETH,” similar to the nearly 60% rally in bitcoin prices following the introduction of U.S. spot ETFs. K33 analysts predict that with the launch of Ethereum ETFs, the price of ETH will start outperforming BTC after almost two and a half years of the ETH-BTC pair’s downtrend.
Last month, the U.S. Securities and Exchange Commission (SEC) unexpectedly approved key filings for spot ETH ETFs, paving the way for their trading in the U.S. Market observers expect the ETFs to start trading as early as late June or early July.
