ETH-based ETFs that can directly hold Ethereum (ETH) will soon launch in the US, with inflows of $4 billion expected in the first five months, according to a report by cryptocurrency analysis firm K33 Research.
The firm's estimate is based on a comparison of assets managed in existing ETH-based ETFs worldwide to similar Bitcoin (BTC) products and open interest (OI) in futures contracts on the Chicago Mercantile Exchange (CME), the preferred market for institutional investors.
Currently, Ethereum's OI on the CME accounts for 23% of the size of BTC futures, but has seen an average share of 35% of BTC futures since ETH futures began trading on the CME in 2021. This indicates that there is significant institutional demand for ETH in the US, according to K33.
Applying these rates to the approximately $14 billion in inflows into spot BTC ETFs so far, K33 estimates ETH ETF inflows will be between $3 billion and $4.8 billion in the first five months. That estimate is slightly higher than JPMorgan's $3 billion estimate for this year.
According to the report, based on current prices, this would equal 800,000 to 1.26 million ETH accumulated in ETFs, or roughly 0.7% to 1.05% of the total token supply, creating a supply squeeze for the asset. Unlike futures-based products, issuers of spot ETFs will be required to purchase tokens on the spot market as investors purchase ETF shares.
“As seen with BTC, this massive supply absorption shock should lead to a price increase in ETH,” said Vetle Lunde, senior analyst at K33 Research.
Bitcoin rose to record highs after an initial correction in late January, with a nearly 60% increase following the launch of US spot ETFs. K33 analysts predicted that with the launch of ETH ETFs, the ETH price will begin to outperform BTC after the ETH-BTC pair's almost two-and-a-half-year downtrend.
According to the K33 report, market observers expect the ETFs to begin trading around the end of June or early July, once the required documentation is completed.
*This is not investment advice.
