The launch of spot Ethereum ETF will potentially result in a supply crunch upon launch, crypto accounting software firm Integral on June 3.
The projection mirrors the sentiment around spot Bitcoin ETFs before their launch earlier this year. The ETFs connected to the flagship crypto have since experienced record inflows, with the BTC supply on centralized exchanges falling notably in tandem.
Ethereum supply crunch
Integral anticipates that ETF issuers will buy and hold large amounts of ETH, thereby removing a portion of ETH from the open markets and driving up the crypto’s price.
The trend is arguably already underway. Integral cited crypto entrepreneur Oliver Isaacs, who revealed that more than $3 billion of ETH had left exchanges since the SEC approved spot ETH approvals on May 23 — putting ETH exchange reserves at a six-year low.
Integral said that separate staking trends will intensify the supply crunch and noted that about 25% of the ETH supply is currently staked. ETF issuers will not engage in staking directly, but staking participants stand to benefit from rising prices, according to the company.
Additionally, Integral believes that approvals will increase institutional adoption of ETH and validate crypto as a legitimate asset class. Furthermore, it said that approvals could spark an “altcoin season” as demand for ETH spills over into other cryptos.
Spot ETH ETFs are expected to launch in the coming weeks or months.
IBIT accounts for 25% BlackRock flows
Many are waiting to see whether Ethereum will follow the trend set by Bitcoin after ETFs connected 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 industry, as evidenced by their staggering and continued growth. BlackRock and Fidelity‘s IBIT and FBTC stand out in particular, following a record-setting streak of inflows in the history of ETFs.
The two funds now account for a significant portion of the overall ETF flows for both asset managers.
Bloomberg ETF analyst Eric Balchunas said BlackRock’s IBIT accounted for 26% of the company’s $65 billion ETF inflows since the start of the year. Notably, BlackRock is the largest ETF issuer in the US, with 429 exchange-traded funds under its belt.
IBIT has recorded total inflows of $16.7 billion since its launch.
Meanwhile, Fidelity’s competing FBTC fund accounts for 56% of its $15.8 billion total ETF flows this year. FBTC has seen $8.9 billion in total inflows to date.
Fidelity has launched and manages 70 ETFs.
Balchunas’ data indicates BlackRock and Fidelity are the second and fifth leading ETF issuers based on year-to-date flows. The two companies rank first and second when solely considering firms that have launched a spot Bitcoin ETF.
