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Breaking News: FTX Recovery Trust Set To Disburse $1.6 Billion By Month-End, FTT Price Skyrockets
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Breaking News: FTX Recovery Trust Set To Disburse $1.6 Billion By Month-End, FTT Price Skyrockets

Ethereum Co-Founder Predicts Supply Crunch From ETFs, This Is The Price Target

Jake Simmons
Jake Simmons
1 year ago
4 mins read
Ethereum ETF Joseph Lubin

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Joseph Lubin, co-founder of Ethereum and CEO of blockchain technology firm Consensys, has expressed that the potential approval of spot Ethereum ETFs by the US Securities and Exchange Commission (SEC) could lead to significant supply constraints for Ether. This development is anticipated to be a “watershed” moment for Ethereum.

In an exclusive interview with DL News, Lubin predicted that the approval of spot Ethereum ETFs will unlock substantial institutional demand. Given that many institutions have begun their crypto investments with spot Bitcoin ETFs, Ethereum is naturally the next substantial asset for diversification.

“There’s going to be a pretty large amount of natural, pent-up pressure to purchase Ether” through these ETFs, Lubin commented. However, he also noted that the situation for Ethereum differs significantly from that of Bitcoin because of the underlying supply dynamics.

A major factor distinguishing Ethereum from Bitcoin in the context of ETF creation is the availability of the assets. On-chain data indicates that more than 27% of all Ether is staked across various protocols on the Ethereum network. These funds are locked in contracts and are contributing to the network’s security and operations, thus they are not readily available for market trading.

“Much of the Ether is put to work in the core protocol, DeFi systems, or in DAOs,” Lubin explained. This structural difference means that there is less Ether available for ETF providers to purchase and allocate to new ETF shares.

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In August 2021, the Ethereum network’s EIP 1559 introduced a burning mechanism where a portion of the Ether used for transaction fees is permanently removed from circulation. This deflationary mechanism is designed to balance Ether supply growth and potentially increase its scarcity over time.

As network activity increases—potentially spurred further by new institutional interest in Ethereum through ETFs—this burn mechanism will gradually reduce the available supply, adding another layer to the potential supply crunch. “This could be a pretty profound watershed moment”, Lubin said.

Ethereum Price Targets And Doubts

The market impact of an approved Ethereum spot ETF could be significant. Crypto analyst Miles Deutscher projected a possible scenario where Ethereum could see a price surge similar to that experienced by Bitcoin following its own ETF approval.

According to Deutscher’s analysis, “BTC rallied 75% in 63 days after the spot ETF was approved. If ETH follows the same trend (if approved), this would take it to $6,446 by July 23.”

$BTC rallied 75% in 63 days after the spot ETF was approved.

If $ETH follows the same trend (if approved), this would take it to $6,446 by July 23. pic.twitter.com/FfWg9VGUMx

— Miles Deutscher (@milesdeutscher) May 21, 2024

However, opinions among analysts vary. Vetle Lunde from K33 Research pointed out the challenges in replicating Bitcoin’s success, noting that the futures-based Ethereum ETFs have only captured a small fraction of the assets compared to their Bitcoin counterparts prior to spot ETF approval. “Fut-based ETH ETFs have seen cumulative net inflows of $126m since launch ~ roughly equivalent to the inflow to BITX over the past 3 days. Fut-based ETH ETFs aggregated AUM is only 7.4% of the AUM fut-based BTC ETFs had before the spot approval,” he remarked.

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Meanwhile, crypto analyst Vijay Boyapati raised concerns about the structural differences in ETFs, specifically the inability of ETF structures to incorporate staking. “It should be noted that the ETH ETFs, if approved, will be a much worse proxy for the underlying asset than BTC ETFs because the SEC is still extremely unlikely to allow the ETF applicants to stake,” he said.

This could result in the ETFs not fully reflecting the underlying value growth of Ethereum price, as also highlighted by Alex Thorn, Head of Research at crypto-focused financial services firm Galaxy commented: “Lack of staking in ETH ETPs would be material for returns. If u bought $10k ETH on Merge day in Sep ‘22 and held until today without staking it, you underperformed by 8% over that period vs someone who bought and staked to collect issuance, tips, and MEV.”

At press time, ETH traded at $3,759.

Ethereum price
Ether price, 1-week chart | Source: ETHUSD on TradingView.com
Featured image from Consensys, chart from TradingView.com
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Jake Simmons
Jake Simmons

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

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His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

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