Markets
Ethereum’s ETH price is poised for a rally as ETFs could attract $4 billion in inflows in five months, K33 research says
Ethereum-based ETFs (Exchange Traded Funds) that can hold ether directly (ETH) will arrive in the US soon and could attract $4 billion in inflows in the first five months, crypto analytics firm K33 Research said in an article relationship.
The company based its forecast by comparing assets under management in existing ETH-based exchange-traded products around the world to similar bitcoin (BTC) products and the amount of open interest (OI) in futures contracts on the Chicago Mercantile Exchange (CME), the reference market for institutional investors.
Ether OI on the CME is currently 23% of the size of BTC futures, but has seen an average 35% share of BTC futures from ETH futures started trading on the CME in 2021, indicating significant institutional demand for ETH in the US, according to K33.
Applying these ratios to the nearly $14 billion in inflows into BTC spot ETFs so far, K33 estimates ETH ETF inflows estimated to be between $3 billion and $4.8 billion within the first five months. This estimate is slightly higher than JPMorgan’s $3 billion forecast for this year.
Based on current prices, this would equate to 800,000-1.26 million ETH accumulated in ETFs, or approximately 0.7%-1.05% of the total token supply, creating a supply crunch for the asset, according to the report. Unlike futures-based products, issuers of spot ETFs will have to purchase tokens on the spot market while investors purchase ETF shares.
“As seen in the case of BTC, this huge supply shock should lead to ETH price appreciation,” said Vetle Lunde, senior analyst at K33 Research.
Bitcoin, after an initial correction in late January, rallied nearly 60% to record levels following the introduction of US spot ETFs. Analysts at K33 predicted that with the launch of ether ETFs, the price of ETH would begin to outperform that of BTC after almost two and a half years of the ETH-BTC pair’s downtrend.
Last month, the US Securities and Exchange Commission (SEC) approved key filings for ETH spot ETFs, in a move that surprised most market participants. This move paved the way for the funds to be greenlit to trade in the United States. After processing the necessary documentation, market watchers expect ETFs to begin trading as soon as late June or early July, the K33 report said.
In particular, the applicants deleted the parts of their documents that would have allowed the assets to be invested in the fund, probably to please the regulator.
K33 said that omitting staking would not negatively impact ETF inflows, contradicting JPMorgan’s position, as 99% of assets managed in Canadian ETH ETFs and 98% of European products are held in non-staking funds.