The price of Ethereum (ETH) is anticipated to decrease following the initial enthusiasm surrounding the debut of spot Ethereum exchange-traded funds (ETFs) in the United States. Renowned analyst Benjamin Cowen forecasts a price reversion to levels seen before The Merge of September 2022 if Ethereum’s supply continues to grow.
Will Prices Revert to Pre-Merge Levels?
Cowen explained on July 19 that Ethereum’s supply has been increasing by about 60,000 ETH monthly since April. He predicts this trend will push the supply back to pre-The Merge levels by December. Initially, The Merge was expected to create a deflationary effect, reducing the supply by approximately 455,000 ETH by April 2024. However, the recent influx of around 15,000 ETH in supply changes this outlook.
The analyst also noted that if the current supply surge persists, Ethereum’s price might drop in the coming months. He drew parallels to 2016, suggesting that the ETH/BTC trading pair could experience a significant collapse starting in September 2024. Such a scenario may diminish the appeal of spot Ethereum ETFs compared to Bitcoin ETFs.
How Will Ethereum’s Supply on Exchanges Influence Prices?
Meanwhile, on-chain analyst Leon Waidmann pointed out that Ethereum is facing a supply crisis. In a post dated July 16, Waidmann mentioned that the supply of ETH on cryptocurrency exchanges has fallen to 10.2%, while 39.3% of ETH is currently locked in smart contracts. He emphasized that many investors are unaware of the limited circulating supply of ETH, which he sees as a positive sign for the altcoin leader.
Key Takeaways
- Ethereum’s supply has been rising by 60,000 ETH per month since April.
- Price may revert to pre-Merge levels by December if this trend continues.
- Possible collapse of ETH/BTC trading pair anticipated by September 2024.
- Spot Ethereum ETFs might lose their appeal compared to Bitcoin ETFs.
- 10.2% of ETH is held on exchanges, with 39.3% locked in smart contracts.
The results of these analyses suggest that while initial excitement for spot Ethereum ETFs might drive short-term price gains, long-term factors such as supply increases and market dynamics could lead to price corrections. Investors should remain cautious and informed about these underlying trends.