Ethereum Faces Supply Pressure: Analysts Warn of Possible Price Dip Amid ETF Buzz

Ethereum’s current market dynamics have drawn attention from analysts, particularly regarding its price and supply situation. According to Benjamin Cowen, the founder of Into The Cryptoverse, the recent increase in Ethereum’s supply could lead to a dip in its price after the initial excitement surrounding the launch of spot Ethereum exchange-traded funds (ETFs) fades. Cowen warned that if the supply continues to rise at a rate of approximately 60,000 ETH per month, it may return to levels seen prior to the Ethereum Merge, which took place in September 2022. At present, Ethereum’s price sits at $3,507.

Post-Merge, Ethereum transitioned to a proof-of-stake model and initially saw a decline in its supply, with approximately 455,000 ETH getting removed from circulation by April 2024. However, the current trend shows that about 150,000 ETH has been introduced back into the market. Cowen suggests that maintaining this supply trend could bring Ethereum’s supply in line with pre-Merge figures, which could create downward pressure on its price. He speculates that the novelty of the new ETFs could diminish, particularly as timelines suggest that a significant market turn may not occur until September 2024.

Moreover, on-chain analyst Leon Waidmann has described the situation as a “supply crisis,” noting that only 10.2% of Ethereum is held on exchanges while a considerable proportion, around 39.3%, is locked in smart contracts. This presents a unique scenario where supply dynamics could significantly impact trading behaviors. As five new spot Ethereum ETFs are set to start trading on the Chicago Board Options Exchange on July 23, 2023, regulatory conditions remain a key factor in how the market will react in the short term. While Cowen believes Ethereum might increase in value over the next year and a half, he acknowledges the possibility of a decline in the mid-term outlook.