Ethereum ETF Approval Leads to $3 Billion Ether Outflow, Hinting at Supply Squeeze

• The approval of spot Ether exchange-traded funds (ETFs) in the US has triggered significant market movements.
• Following the ETF approval on May 23, over $3 billion worth of Ether was withdrawn from centralized crypto exchanges.
• This massive outflow could indicate a potential supply crunch on the horizon.

Spot Ether ETF approval has led to substantial outflows from centralized exchanges, hinting at possible supply constraints.

Potential Boost from Ethereum ETFs to Record Highs

Last week, Bloomberg’s ETF analyst Eric Balchunas predicted that Ether ETFs might be launched by the end of June. Several analysts posit that if these spot ETFs start trading, driven by rising demand, Ether could surpass its previous all-time high of $4,870 set in November 2021.

The Impact of Demand Pressure on Ether

In a report dated May 28, DeFi analyst Michael Nadeau suggested that Ether might benefit more from the demand surge compared to Bitcoin. This is attributed to Ethereum validators not facing the same level of “structural selling pressure” as Bitcoin miners, who often have to sell BTC to cover mining costs.

Potential Risks from Grayscale Ethereum Trust

However, there are concerns that the Grayscale Ethereum Trust (ETHE), which manages a fund worth $11 billion, might mimic the initial month behavior of the Grayscale Bitcoin Trust (GBTC), which saw $6.5 billion in outflows. Such a scenario could impact Ether’s price movement adversely.

Conclusion

The crypto market is bracing for significant changes as Ethereum ETFs could unlock new investment avenues and possibly drive prices to unprecedented highs. While the potential for a supply crunch looms, investors must stay informed and cautious given the inherent market risks.