Since the approval of Ether Exchange funds in the United States on May 23, more than $3 billion worth of Ether has been withdrawn from centralized cryptocurrency exchanges (CEX), indicating a potential upcoming supply constraint.
Data from CryptoQuant reveals that between May 23 and June 2, the amount of Ether stored on exchanges fell by about 797,000 ETH, equivalent to $3.02 billion.
The drop in currency reserves suggests that fewer coins are available for immediate sale, as investors transfer their holdings to self-storage for various purposes other than immediate sale.
Ether supply on exchanges lowest in years
Further data shared by BTC-ECHO analyst Leon Waidmann, sourced from Glassnode, underscores that the percentage of ether supply in circulation held on exchanges is now at its lowest level in years, at just 10.6%. The decline in available supply on exchanges could contribute to increased demand pressure for Ether.
Attention has been drawn to the potential launch of Ether ETFs, with Bloomberg ETF analyst Eric Balchunas suggesting a “reasonable possibility” of their introduction by the end of June.
Some analysts speculate that the launch of ETH ETFs could result in increased demand for Ether, potentially pushing its price above the previous record high of $4870 reached in November 2021, similar to the effect seen for Bitcoin following the introduction of Bitcoin ETFs.
Compared to Bitcoin, Ether could benefit even more from demand pressure due to lower “structural selling pressure,” as highlighted in a report by DeFi analyst Michael Nadeau.
While Bitcoin miners sometimes sell BTC to cover mining costs, Ethereum validators do not face the same operating costs. This dynamic could potentially contribute to Ethereum’s better price performance.
However, concerns have been raised about the impact of the Grayscale-owned Ethereum Trust (ETHE), which manages $11 billion in funds , on Ether’s price action. If it follows the pattern of the Grayscale Bitcoin Trust (GBTC), there could be significant outflows from ETHE, which would affect Ether’s price.
According to CoinMarketCap, the Ether price currently stands at $3781, down 0.82% in the past 24 hours and down 23% from its all-time high.
The approval of the Ethereum ETF was political in nature
Bloomberg ETF analyst James Seyffart believes that the approval of Ethereum ETFs was likely influenced by political decisions rather than purely financial considerations. In a recent interview, Seyffart suggested that the political climate, including the actions of the Biden administration and reactions from the crypto community, played a significant role in the approval.
Beyond Bitcoin and Ethereum, approval of other cryptocurrency ETFs, including Solana, is unlikely without significant regulatory changes, Seyffart said. He noted that a regulated market is needed to monitor these assets for fraud and manipulation.
In contrast, cryptocurrency investor and trader Brian Kelly suggested that Solana could potentially become the next cryptocurrency holding ETF in the United States.
In a recent episode of CNBC’s “Fast Money” program, Kelly, who is also the founder and CEO of the BKCM Digital Asset Fund, asked the question, “Now there’s a question: who’s next?” He then suggested: “You have to think of Solana as the next one. Bitcoin, Ethereum and Solana are probably the big three in this cycle.“
