With the Ethereum spot ETF expected to start trading on Tuesday, July 23, expectations for the Ethereum price have been rising significantly. Many analysts and market experts have come forward to predict that this will be a major development for the Ethereum price, pushing it to new record highs. However, one analyst has warned investors to be cautious during this time as the Ethereum spot ETF may not have the expected impact immediately.
Why Ethereum Spot ETFs Could Lead to a Decline
While the Ethereum ETFs that have been launched for trading have been well received by the crypto community, crypto expert Benjamin Cohen has pointed out another worrying development that could lead to a collapse in the price of Ethereum. This time, it is about the rapid increase in the supply of Ethereum.
In X (formerly Twitter) mailCohen points out that the supply of Ethereum has become inflationary again. For reference, the Ethereum merger previously made the supply of Ethereum deflationary, as transaction burns sent hundreds of thousands of Ethereum to dead wallets.
However, recently, as activity has fallen to new lows on the Ethereum network, supply has turned into inflation as there are not enough transaction fees being burned to outpace the new supply. More specifically, the cryptocurrency expert revealed that supply has increased by 60,000 ETH in just one month.
Now, if supply continues to increase at this rate, Cohen explains that it will only take December for supply to return to what it was before the merger was complete. Unless there is a reversal and supply turns contractionary again, this new supply could undermine inflows from spot Ethereum ETFs and drive the price of Ethereum lower instead.
Spot ETH ETF Trading Approaches
Last week, the Chicago Board Options Exchange (CBOE) announced that a total of five Ethereum spot ETFs will go live on July 23, 2024. These include Fidelity (FETH), VanEck (ETHV), 21Shares (CETH), Invesco (QETH), and Franklin Templeton (EZET), all of which will compete for the top spot.
So far, it’s been a fee battle, with each fund trying to outdo the other with lower fees. For example, Franklin Templeton’s fund offers a low fee of 0.19%, beating Bitwise and VanEck’s 0.2%, and ahead of BlackRock, Fidelity and Invesco Galaxy, which have set their fund fees at 0.25%.
Like many others, Bitwise CTO Matt Hogan has expressed optimism about the launch of spot Ethereum ETFs. pridect These funds are expected to see inflows of up to $15 billion in less than two years after launch.
Featured image created using Dall.E, chart from Tradingview.com