Ethereum, the second-largest cryptocurrency by market cap, is facing a potential supply crunch due to the recent approval of spot Ethereum exchange-traded funds (ETFs). The supply of Ethereum on centralized exchanges has reached a low not seen in eight years, with only 12.78 million ETH available, which represents around 11% of the total supply. This decrease in exchange balances is typically a positive sign, indicating that investors expect price growth and are not planning to sell their ETH in the near future.
The approval of Ethereum ETFs by the US Securities and Exchange Commission (SEC) is expected to generate significant institutional demand for the cryptocurrency. Similar to the demand seen for spot Bitcoin ETFs, which now hold 800,000 BTC, the CEO of Alluvial, Mara Schmiedt, believes Ethereum could experience a similar surge in demand. This could potentially result in a significant demand shock, particularly if $20 billion is taken out of the market.
Institutional activity in Ethereum is already on the rise, with anticipation of ETF approval leading to a two-year high in on-chain trading volume. The volume reached $15.98 billion, largely driven by transactions exceeding $100,000, which are typically conducted by crypto whales. These large-volume transactions accounted for 90% of the total traded volume on that particular day.
The approval of Ethereum ETFs marks a notable milestone in the acceptance of cryptocurrencies. As a result, it is expected that ETH whales’ activity will increase, as seen in recent high-volume transactions. This shifting landscape and growing institutional confidence in Ethereum have the potential to drive even greater market movements in the future.