Optimism Around Spot ETFs
Analysts expect significant Ethereum growth in the second half of the year. Optimism is fueled by the anticipated launch of spot ETFs in July. Comparable Bitcoin funds raised $15 billion in six months. Estimates suggest Ethereum could attract $5-10 billion.
Market Capitalization and Investment Impact
Ethereum’s market capitalization is three times lower than Bitcoin’s. Thus, the expected investment inflow should have a greater multiplicative effect.
Reduced Circulating Supply
The growing volume of staked coins reduces the circulating supply. Currently, 32.8 million ETH, or 27.3% of total issuance, is staked.
Long-term Deflationary Effects
Network deflation also has a positive long-term impact. Since transitioning to PoS, 1.4 million ETH has been issued, while 1.7 million ETH has been burned. This gap will widen with increased network activity, as part of the transaction fees are burned.
Potential for a New Price Record
These combined factors could lead to a new Ethereum price record this year.
Concerns About Grayscale’s ETHE
However, the optimistic forecast doesn’t consider the impact of outflows from Grayscale’s ETHE fund. This fund holds 2.9 million ETH worth $9 billion. Converting the trust into a spot ETF could unlock assets, prompting some investors to exit. When GBTC converted, it lost over 50% of its investments, leading to an $18.7 billion outflow.
Possible Negative Multiplicative Effect
A similar effect could occur with ETHE, but in reverse. ETHE holds a larger share relative to the projected inflow than GBTC did for Bitcoin ETFs. If history repeats, Ethereum’s growth may lag behind Bitcoin’s for the rest of the year.
