Key Points
- On-chain data suggests a significant Ethereum rally is imminent, with a potential breakout above $4,000.
- Since the approval of the spot Ether ETF, $3 billion worth of Ethereum has been withdrawn from exchanges.
On-chain data indicates that Ethereum, the world’s second-largest cryptocurrency, is gearing up for a significant rally. The crypto has been hovering around the $3,800 mark, but a breakout above $4,000 seems likely.
Ethereum Withdrawals and the Spot Ether ETF
In the week following the approval of the spot Ether ETF, the amount of Ethereum moving away from exchanges has increased by 800,000, equating to around $3 billion. This could signal a potential supply squeeze that could push the Ethereum price higher. Lower exchange reserves are often seen as bullish indicators, as they show fewer coins are available for sale as investors move their holdings into self-custody.
CryptoQuant suggests two potential groups could be behind this large movement of Ethereum off exchanges. The first group includes whales or individual investors who expect a price surge following the Spot ETF approval. These investors might be looking to capitalize on the expected market uptrend to maximize their returns.
The second group could be institutions preparing for the launch of the spot ETF. These institutions may be getting ready to meet the anticipated demand from their investors once the Ethereum Spot ETF is introduced.
While these explanations are speculative, the trend of significant outflows from exchanges over eight days could have a positive effect on prices in the medium term, as reported by CryptoQuant.
The Future of Ethereum ETFs
The US SEC approved the 19b-4 filings for the spot Ethereum ETF last week, but they have yet to approve the S-1 registrations for the crypto fund to go live for trading.
Bloomberg analyst Eric Balchunas stated last week that Ether ETFs could go live by the end of June. Some market analysts also believe that Ether could surpass its all-time high of $4,840 once the Ethereum ETFs start trading due to increased demand. This suggests a similar scenario to the Bitcoin ETF launch could occur for Ethereum.
In a report from May 28, crypto analyst Michael Nadeau from the DeFi sector suggested that Ether might benefit more from demand dynamics than Bitcoin. Nadeau pointed out that while Bitcoin often faces “structural sell pressure” from miners selling to cover expenses, Ethereum validators do not have similar operational costs, which could lead to less selling pressure on Ether.
However, there are concerns that if the Grayscale Ethereum Trust (ETHE) is converted to an ETF, it could influence the Ethereum price action in a similar way to what happened with GBTC. Currently, the Grayscale fund ETHE manages over $11 billion in AUM.
