With the Ethereum spot ETF trading expected to commence On Tuesday, July 23, expectations for the ETH price skyrocketed. Numerous analysts and market experts have predicted that it would be a great development for the ETH price, pushing it to new all-time highs. However, one analyst has warned investors to be cautious during this time, as the Spot Ethereum ETFs that go live may not have the expected effect right away.
Why Spot Ethereum ETFs Could Lead to a Downturn
While the Spot Ethereum ETFs going live for trading have been well received by the crypto community, crypto expert Benjamin Cohen has pointed out another alarming development that the ETH price crash. This time it is the ETH supply that is increasing rapidly.
In the X (formerly Twitter) afterCohen points out that the ETH supply had become inflationary again. For reference, the Ethereum Merger previously deflationized the ETH supply, with losses from transactions sending hundreds of thousands of ETH to the dead wallet.
Recently, however, activity has fallen to new lows, Ethereum networkthe supply has become inflationary because not enough transaction fees are being burned to outpace the new supply. More specifically, the crypto expert revealed that the supply had increased by 60,000 ETH in just one month.
If supply continues to increase at this rate, Cohen explains that it will only take until December for supply to return to pre-merge levels. Unless a reversal occurs and supply becomes deflationary again, this new supply could undermine the inflow of Spot Ethereum ETFs and the ETH price instead down.
Spot ETH ETF trading is getting closer
Last week, the Chicago Board Options Exchange (CBOE) announced that a total of five Spot Ethereum ETFs will go live for trading on July 23, 2024. These funds include Fidelity (FETH), VanEck (ETHV), 21Shares (CETH), Invesco (QETH), and Franklin Templeton (EZET), all of which will be vying for the top spot.
So far, there has been a battle over compensationwith each fund attempting to outperform the other with lower fees. For example, the Franklin Templeton fund offers a low fee of 0.19%, beating Bitwise and VanEck’s 0.2% and surpassing BlackRock, Fidelity and Invesco Galaxy, which have set their fund fees at 0.25%.
Like many others, Bitwise CIO Matt Hougan has expressed optimism that Spot Ethereum ETFs are set to begin trading. Hougan predicts that these funds could generate inflows of up to $15 billion within two years of their launch.
Main image created with Dall.E, chart from Tradingview.com