Ether (ETH) surged past $3,500 as anticipation builds for the launch of spot exchange-traded funds (ETFs) on Tuesday. Market analysts are closely watching Grayscale’s $9 billion ETH Trust due to concerns that its potential selling pressure might counteract the positive impacts of new inflows.
This scenario could exert downward pressure on the market, despite the initial excitement surrounding the ETFs.
Inflows and Market Reactions
HashKey Capital, which helped launch one of the Ether ETFs in Hong Kong, estimates that inflows could reach $3 billion in the first six months of U.S. trading. This projection is based on Bitcoin’s market cap, which is 30% of Ether’s, and the absence of staking.Â
Additionally, Ether’s inflation rate, which increases token supply in the open market, is a concern.
Over the past month, ETH supply increased by around 60,000 ETH, contrary to expectations. While the supply has decreased by 300,000 ETH since the merge, continued inflation at this rate could negate this reduction within six months, potentially making ETH an inflationary asset again.
ETH Performance and ETF Approval
ETH reversed losses from Monday’s trading session, however, at press time, there was a 1.42% decline in the past 24 hours. On Monday, eight issuers, including BlackRock, received approval for their latest S-1 filings from the U.S. Securities and Exchange Commission.
Market observers are debating whether these ETFs could replicate the performance of their Bitcoin counterparts, which attracted over $17 billion in net inflows since their issuance in January.
Future Prospects and Analyst Predictions
Danny Chong, co-founder of Tranchess, highlighted that Ethereum has more utility than Bitcoin, with features like liquid staking. Despite ETH ETFs initially falling short of industry expectations in Hong Kong, Chong believes that with a larger investor base, ETH ETFs should perform better and bring in the required liquidity.
Citi projected approximately $5.4 billion in inflows within the first half-year, attributing the lower estimate to the lack of staking and Bitcoin’s first-mover advantage. Gemini and JPMorgan have estimated inflows between $3 billion and $6 billion, depending on whether staking is allowed.
The launch of Ether ETFs has generated interest and debate among market participants. While the initial enthusiasm is palpable, the market’s reaction will depend on various factors, including potential selling pressure from large trusts and the impact of Ether’s inflation rate.
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