- The decrease in Ethereum trading supply could be caused by the increase in ETH staking.
- Galaxy Research Expects $5 Billion Inflows in First Five Months of Ethereum ETF Launch
- To validate the bullish thesis, Ethereum needs to break out of the key resistance at $3,629.
Ethereum (ETH) rose nearly 3% on Thursday as the ETH ETF’s upcoming spot launch and key on-chain metrics suggest an ETH rally could be around the corner.
Daily Market Movers Digest: Why Drop in ETH Exchange Supply, Launch of Staking ETH and ETH Spot ETFs Trigger a New High for Ethereum
According to data from Glassnode, Ethereum supply on exchanges has continued to trend downward despite recent price increases.
As previously reported, this means that most long-term ETH (LTH) holders have yet to start taking profits. LTH may anticipate higher price increases and a new all-time high before they start taking profits, especially with the launch of spot ETH ETFs on the horizon.
The growing yield of ETH staking and restaking protocols could also be fueling the exchange’s declining supply. Glassnode data also shows that the number of ETH staked has been steadily increasing, meaning that the majority of the exchange’s declining supply may have flowed into staking protocols.
ETH vs ETH trade offer staked
With the growth of EigenLayer, Kaiko, and Symbiotic, and the growing number of underlying restaking and liquid restaking protocols they power, ETH trading supply could continue to decline. Combined with the potential launch of spot ETH ETFs, Ethereum could be poised for significant price growth in the future.
The Securities and Exchange Commission (SEC) approved the issuers’ spot ETH ETF 19b-4 filings on May 23, but has yet to greenlight their S-1 registration statements. The issuers filed amended S-1s last week after the SEC issued “light-touch” comments on them.
A recent report from Galaxy Research on potential spot inflows into ETH ETFs is also in line with this prediction. The report stated that Ethereum ETFs could attract up to $5 billion within their first month of trading.
“We expect net inflows into ETH ETFs to be 20-50% of net inflows into BTC ETFs in the first five months, with a target of 30%, implying $1 billion per month of net inflows,” said Galaxy analyst Charles Yu.
The report states that Ethereum’s price would be more sensitive to inflows than Bitcoin due to ETH supply locked up in staking protocols, bridges, smart contracts, and limited exchange supply. However, Galaxy also noted that potential outflows from Grayscale’s Ethereum Trust conversion and the lack of staking could impact ETH ETF inflows.
This follows Bitwise CIO Matt Hougan’s earlier prediction that spot ETH ETFs could attract $15 billion in net inflows by the end of 2025.
According to a report from Reuters, the SEC may give final approval to ETH spot ETFs on July 4.
ETH Technical Analysis: Could Ethereum Break Above Key $3,629 Resistance?
Ethereum is trading around $3,450, up nearly 3% on Thursday, following a slight recovery in the cryptocurrency market. The rally has seen ETH short liquidations reach $18.31 million, with longs only $4.10 million in the past 24 hours.
Chicago Mercantile Exchange (CME) ETH open interest (OI) has hit an all-time high this week. With the price of ETH slightly up, the increase in CME OI indicates that US investors may be expecting a rally. This also means potential good inflows into ETH spot ETFs at launch, potentially causing the price of ETH to rise.
ETH/USDT 4-hour chart
ETH could rally as the potential launch date for the ETH spot ETF approaches, but it faces resistance at the $3,629 price level. Over the past three weeks, ETH bulls have failed on three separate attempts to sustain a move above this level. A successful sustained move above the $3,629 price level could see ETH aim to break out of the next resistance at $3,829.
A move below the $3,300 support could see ETH fall back to raise liquidity around the May 20 Fair Value Gap, extending from $3,110 to $3,457. Key support at $3,203 could help prevent a further decline.
