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Ether Price Poised for Supply ‘Shock’ as ETFs May Attract $4B Inflows in Five Months, K33 Research Says

Jun 3, 2024
    U.S. spot ETFs could accumulate around 1 million ETH in five months based on the size of similar ETH products globally and CME futures open interest relative to bitcoin, K33 Research saidThe omission of staking will not negatively impact the inflows to the ETFs, the report said.
As a researcher with a background in cryptocurrencies and exchange-traded funds (ETFs), I find the recent report from K33 Research on Ethereum-based ETFs in the U.S. particularly intriguing. Based on their analysis of global ETH ETF assets, CME futures open interest, and institutional demand for ETH, they predict a potential inflow of $4 billion within the first five months of these new ETFs’ launch.As a researcher studying the cryptocurrency market, I’ve come across exciting news regarding Ethereum-based Exchange Traded Funds (ETFs) in the U.S. These innovative investment vehicles are set to debut soon and may potentially draw in an impressive $4 billion in inflows within the first five months of their operation, according to K33 Research’s latest report.
The company developed its prediction by analyzing the quantity of Ethereum (ETH) assets managed in international ETH exchange-traded products against corresponding Bitcoin (BTC) products, as well as taking into account the volume of open contracts in CME’s Bitcoin futures market. This marketplace is widely used by institutional investors.

The proportion of Open Interest (OI) for Ethereum’s futures contracts on the Chicago Mercantile Exchange (CME) is presently at around 23% compared to Bitcoin’s futures. However, historically, Ethereum’s futures have accounted for an average of 35% of Bitcoin’s OI since their launch in 2021. This discrepancy suggests that there has been substantial institutional investment in Ethereum within the US market as per K33’s analysis.

Ether Price Poised for Supply 'Shock' as ETFs May Attract $4B Inflows in Five Months, K33 Research Says

Based on these ratios, the approximately $14 billion invested in Bitcoin spot ETFs to date translates to an estimated Ethereum ETF inflow of between $3 billion and $4.8 billion within the first five months. This projection is somewhat greater than JPMorgan’s forecasted $3 billion for 2021.

Ether Price Poised for Supply 'Shock' as ETFs May Attract $4B Inflows in Five Months, K33 Research Says

According to the report, if current prices hold, the Ethereum held in these ETFs would amount to between 800,000 and 1.26 million tokens. This equates to approximately 0.7%-1.05% of the total Ethereum supply, potentially leading to a scarcity of the asset within the market. Unlike futures ETFs, the entities managing these spot ETFs will need to acquire Ethereum directly from the market whenever investors purchase their shares.

According to Vetle Lunde, a senior analyst at K33 Research, the significant supply absorption event observed in Bitcoin is expected to result in a rise in Ethereum’s price.

After experiencing a correction in late January, Bitcoin rebounded strongly, surging by nearly 60% to reach new peaks. This surge can be attributed to the introduction of U.S. spot Bitcoin Exchange Traded Funds (ETFs). As for Ethereum, K33 analysts anticipate that the launch of ether ETFs will lead to Ethereum outperforming Bitcoin, marking a shift in the downtrend of the ETH–BTC pair, which has persisted for almost two and a half years.

Last month, the Securities and Exchange Commission (SEC) in the United States gave the go-ahead for crucial filings related to spot Ethereum Exchange Traded Funds (ETFs). This unexpected decision opened the door for these funds to begin trading in the US. Following the completion of necessary paperwork, market analysts anticipate that the ETFs will commence trading by late June or early July, according to the K33 report.

Significantly, those applying for approval omitted sections from their submissions enabling the securing of assets within the fund, presumably as a concession to the regulatory body.

K33 made a statement opposing JPMorgan’s viewpoint, asserting that leaving out the staking process would not decrease inflows to Ethereum ETFs in Canada and Europe since nearly all assets under management in these products are housed in non-staking funds.

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2024-06-04 22:05