ETH Supply Surge Casts Shadow On Spot Ethereum ETF Excitement

In the last three months, the Ethereum (ETH) supply has surged by 150,000, the spot Ethereum ETF approval could help to absorb some of this.

• Ethereum supply has been growing by 60,000 ETH per month since April 2024.
• An analyst suggests that the final capitulation for the ETH/BTC trading pair might begin in September 2024.
• The spot Ethereum ETF approval might help to absorb some of the supply hitting the market.

We are just three days away from the approval of the spot Ethereum ETF, and the excitement among investors is pretty high. However, rapidly increasing ETH supply over the past two months is one of the major concerns going ahead.

ETH Supply Increasing by 60K Per Month

Popular market analyst Benjamin Cowen stated that the Ethereum supply has been increasing by 60K per month since April. He added that if this continues to happen until December this year, the ETH supply in circulation will be similar to that before the Merge event back in September 2022.

If the supply of #ETH keeps increasing by ~60k/month like it has been since April, then by Dec the supply will be back to what it was at the merge.

Could be a narrative that people focus on later this year, when they should actually focus on monetary policy.

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— Benjamin Cowen (@intocryptoverse) July 19, 2024

In the last three months, the Ethereum supply has surged by 150,000. “Currently, since the merge the supply is -298,000. But that will only take 5 months to revert at this pace,” said Cowen.

Cowen added that the major driver for the Ethereum price surge moving ahead would be nothing but monetary policy. 

Unless and until the Fed pivots and moves to quantitative easing, Cowen doesn’t expect a major surge in Ethereum going ahead.

According to Cowen’s analysis, the ETH/BTC trading pair experienced a false breakdown below its lows in Q2 2016, followed by genuine capitulation in Q4 of the BTC halving year. 

If the current pattern mirrors 2016, Cowen suggests that the final capitulation for ETH/BTC may not commence until September 2024. This timeline would allow sufficient time for the initial excitement surrounding the spot ETF, relative to BTC, to diminish.

“If you follow monetary policy, last cycle ETH/BTC broke support the same month that the Fed cut rates,” said Cowen. Well, reports suggest that the Fed Rate cuts could commence sometime around September this year.

Citing historical charts, Cowen explains that the ETH/BTC pair wicked down to the lows in August, while making a substantial rally the next month in September. He believes that a similar pattern could repeat this time as well.

Will Spot Ethereum ETF Absorb the Supply?

With the spot Ethereum ETF hitting the market next week, investors are excited about strong inflows that could follow. Issuers like BlackRock, Fidelity, Grayscale, and others announced their fee structure earlier this week.

Many market analysts have been expecting multi-billion dollar inflows coming into Ethereum ETF by the end of 2024. 

However, this may not happen immediately after the approval. Some analysts also believe that there’s a chance of a sell-the-news kind of event to occur.