As a seasoned researcher with extensive experience in the crypto market, I have closely followed Ethereum’s (ETH) price movements and trends over the past few years. The upcoming approval of the spot Ethereum ETF has generated significant buzz among investors, but as we get closer to the event, I can’t help but raise concerns about the rapidly increasing ETH supply.
In the next few days, the Ethereum ETF’s approval is imminent, generating considerable enthusiasm amongst investors. Yet, a significant issue looms large: the escalating Ethereum supply over the previous two months.
ETH Supply Increasing by 60K Per Month
Market analyst Benjamin Cowen pointed out that approximately 60,000 Ethereum units have been added to the circulating supply every month since April. If this trend persists until December this year, the Ethereum supply in circulation will reach a level similar to what it was before the Merge event occurred in September 2022.
Over the last 30 days, the supply of ETH is up by almost 60,000 ETH.
— Benjamin Cowen (@intocryptoverse) July 19, 2024
Over the past three months, the Ethereum supply has experienced a significant increase of approximately 150,000 units. However, following the merge, the current supply now stands at a decrease of about 298,000 units. This reduction is expected to be reversed within five months at the current rate.
Cowen stated that the primary reason for Ethereum’s price increase could only be attributed to monetary policy. If the Federal Reserve does not shift its stance and implement quantitative easing, Cowen predicts minimal growth in Ethereum’s price.
Based on Cowen’s research, the ETH/BTC trading pair underwent a deceptive drop below its support levels in Q2 2016, only to be followed by genuine selling pressure in the last quarter of Bitcoin‘s halving year. If this trend repeats itself, Cowen proposes that the complete sell-off for ETH/BTC could occur as late as September 2024. This proposed timeline would provide ample opportunity for the initial buzz surrounding the spot Bitcoin Exchange Traded Fund (ETF) to subside.
Based on previous experience, if the Federal Reserve implements monetary policy by cutting interest rates, it is likely that the price relationship between Ethereum and Bitcoin may weaken and break their support level in the same month, according to Cowen’s statement. Current predictions indicate that such rate cuts could potentially occur around September this year.
Using historical data from charts, Cowen posits that the ETH-to-BTC ratio experienced significant lows in August, only to rebound strongly in September. If history repeats itself, we might expect a comparable occurrence in the current situation.
Will spot Ethereum ETF Absorb the Supply?
Next week marks the launch of an Ethereum exchange-traded fund (ETF), and there’s palpable excitement among investors regarding potential substantial inflows. Various issuers, such as BlackRock, Fidelity, Grayscale, and others, have already disclosed their fee structures for this new ETF.
Market experts have predicted substantial investments, totalling in the billions, entering Ethereum ETFs by the close of 2024. Yet, not all of this may materialize instantaneously following approval. Some analysts also entertain the possibility that a sell-the-news situation might unfold instead.
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2024-07-20 08:20