Since the approval of spot Ether exchange-traded funds (ETFs) by the US SEC on May 23, 2024, more than $3 billion worth of Ethereum has been withdrawn from centralized crypto exchanges (CEX). On-chain data indicates that ETH ETFs have a different market response compared to BTC ETFs.
Crypto market analysts are cautious about the initial influx of spot Ether ETFs, as they may not experience the same level of demand as spot Bitcoin ETFs. This is due to the more complex nature of valuing Ether’s use cases.
According to data from CryptoQuant, the amount of Ether held on exchanges has significantly decreased between May 23 and June 2, totaling approximately $3.02 billion. When exchange reserves decrease, fewer coins are available for sale, indicating that investors are choosing to hold onto their coins instead of selling them immediately.
Glassnode data reveals that the percentage of circulating Ether supply held on exchanges is currently at a remarkably low level of 10.6%. Leon Waidmann, an analyst at BTC-ECHO, highlights that both Bitcoin and Ethereum exchange balances are at their lowest levels in years. This indicates that whales continue to accumulate both BTC and ETH, with BTC on exchanges down to 11.6% and ETH at 10.6%.
Experts predict that when spot Ether ETFs become available for trading, Ether’s price may surpass its all-time high of $4,870 reached in November 2021. This surge in demand is reminiscent of the impact Bitcoin experienced after the launch of spot Bitcoin ETFs in January.
However, the current scenario does not reflect this prediction. Currently, the value of Ethereum is $3,811.94, showing a slight decrease of 0.5% in the last hour and an increase of 0.3% compared to yesterday. Over the past seven days, the value of ETH has decreased by 2.2%.
On the first day of trading, spot Bitcoin ETFs saw significant inflows of $655.2 million, surpassing industry expectations. Bitwise’s BITB product received the highest inflows with $237.9 million, followed by Fidelity’s FBTC with $227 million and BlackRock’s IBIT with $111.7 million, according to data from BitMEX Research.
To match the success of BTC ETFs, VanEck proposes analyzing transaction volume, the number of users, and validators to gain valuable insights into the adoption and use of Ethereum.
The introduction of spot Ethereum ETFs exposes more investors to smart contracts and decentralized applications (dApps), increasing awareness about the transformative power of public blockchains in digital commerce.
Grayscale Research predicts that the demand for U.S. spot Ethereum ETFs will be around 25%-30% of the demand for spot Bitcoin ETFs, based on international precedent. However, it is unlikely that the ETFs will have access to a significant portion of the Ethereum supply, such as staked ETH.
Hong Kong recently approved the first spot Bitcoin and Ether ETFs, marking a significant milestone in the crypto market and establishing Hong Kong as a prominent center for crypto investment.
In conclusion, the approval of spot Ether ETFs has led to a significant withdrawal of Ethereum from centralized crypto exchanges. While the initial demand for these ETFs may not be as high as Bitcoin ETFs, there is optimism about the potential for Ethereum’s price to surpass its previous all-time high. The introduction of these ETFs also increases exposure to smart contracts and decentralized applications, contributing to the adoption of Ethereum in digital commerce.
