Ethereum’s significant price increase over recent months has caught the attention of institutional investors. Matt Hougan, the Director of Investments at Bitwise, foresees this trend continuing in the coming months, accentuated by the growing institutional interest in Ethereum. This interest has been a substantial factor in the platform’s rising value. Even though Ethereum did see a decline in the initial months of the year, it has rebounded, climbing more than 50% within the past month and soaring over 150% from its low point in April.
What is Driving Ethereum’s Current Surge?
Ethereum-based exchange-traded products (ETFs) became available in July 2024, according to Hougan. Initially, there was a lukewarm reception, but by mid-May, interest had skyrocketed. Inflows into spot Ethereum ETFs surpassed $5 billion since May 15th. Additionally, various firms like Bitmine and SharpLink began revealing their Ethereum holding strategies, reflecting increased corporate acquisition of Ethereum.
“ETFs and Corporate Treasuries have purchased 2.83 million ETH since May 15, exceeding $10 billion at today’s prices. During the same timeframe, the purchases were 32 times the new supply. This scenario explains the increase in ETH price.”
Can Ethereum’s Demand Persist in the Future?
Hougan envisions the momentum will persist, fueled by continuing institutional interest and developments in the stablecoin and tokenization industries. As the market evolves, Ethereum ETFs are expected to maintain strong inflows. Furthermore, the tendency of institutional bodies to hold Ethereum is anticipated to strengthen over time.
“Looking ahead, ETFs and Treasury Companies may acquire $20 billion worth of ETH over the next year. At current prices, this amounts to 5.33 million ETH. The network is expected to produce around 0.80 million ETH in the same period. Thus, demand could be approximately seven times the supply.”
Currently, Ethereum trades at $3,705, having declined by 1% over the past 24 hours. Notwithstanding this slight downturn, forecasts indicate its value is set to increase over the medium to long term.
Despite the inherent investment risks, the burgeoning institutional interest and increased trading volume in Ethereum have emerged as key market catalysts. Investment enthusiasts are encouraged to conduct thorough research and risk assessments. The notable demand from both institutions and individual investors is likely to alter the supply-demand equilibrium, impacting price formation.
Ethereum’s dynamic rise, spurred by substantial institutional interest, signals a profound shift in how traditional finance views and interacts with cryptocurrencies. The ongoing surge in activity and interest could mark Ethereum’s solidified position in the global financial landscape.
