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Ethereum’s price could face downward pressure in the coming months as the initial excitement over spot Ethereum exchange-traded funds (ETFs) subsides amid ongoing supply increases, according to analysts.
Benjamin Cowen, crypto trader and founder of Into The Cryptoverse, highlighted concerns about Ethereum's supply dynamics in a July 19 post on social media platform X. Cowen noted that if Ethereum's supply continues to increase at its current rate of approximately 60,000 ETH per month since April, it could revert to pre-Merge levels by December. The Merge, which transitioned Ethereum to a proof-of-stake consensus model in September 2022, initially made Ethereum deflationary, reducing its supply by about 455,000 ETH by April 2024.
However, since then, the supply has risen by around 150,000 ETH, prompting Cowen to suggest that ongoing increases could potentially negate the deflationary effects observed post-Merge.
Cowen also speculated on the market dynamics following the launch of five spot Ethereum ETFs on the Chicago Board Options Exchange (CBOE) starting July 23, pending regulatory approval. These ETFs include the 21Shares Core Ethereum ETF, Fidelity Ethereum Fund, Invesco Galaxy Ethereum ETF, VanEck Ethereum ETF, and Franklin Ethereum ETF, approved by the United States Securities and Exchange Commission (SEC) in May.
Despite the ETF launch, Cowen cautioned that the novelty effect relative to Bitcoin ETFs might diminish over time, potentially impacting Ethereum's price performance in the near term.
Reflecting on Ethereum's current trading price of $3,507 as per CoinMarketCap data, Cowen suggested a possibility of price decline in the next 3-6 months, even though he anticipates higher prices in the longer term.
Supporting this perspective, onchain analyst Leon Waidmann recently highlighted Ethereum's "supply crisis," noting that a significant portion of ETH is locked in smart contracts while exchange balances have decreased to 10.2%.
As Ethereum navigates these dynamics, market participants are closely monitoring how the introduction of spot Ethereum ETFs will influence broader market sentiment and price movements in the cryptocurrency landscape.
