Ethereum Co-Founder Shares Insight on How ETF Could Impact of ETH Supply

Ethereum ETF, once approved, will lead to a massive supply crunch. An Ethereum co-founder shared this insight in a recent interview.

Joe Lubin, the CEO of Consensys and a well-known pioneer of autonomous technology, stated with complete conviction that a spot ETF will drive a buying frenzy, which will cause a surge in demand. He added that such an increase would result in an ETH shortage.

The Ethereum exchange-traded fund (ETF) is still in the works within the conventional market regulatory framework. Following months of media blackouts, the Securities and Exchange Commission accepted the funds of the Ethereum ETF.

Lubin’s Predictions on ETFs

According to Lubin, institutions that  recently gained exposure to Bitcoin through the newly launched ETFs “will likely want to expand into another regulated ETF.” He predicts that a significant number of forces will arise to invest in ether through ETFs.

Moreover, he added that compared to January, when initial spot Bitcoin ETFs got approval, there will be less supply to meet the current demand.

When it comes to Bitcoin authorized participants, the companies hired by the ETFs to purchase the cryptocurrency daily could easily buy dormant coins from platforms or over-the-counter competitors. However, on-chain statistics indicate that over 27% of Ether’s overall supply is now set on the Ethereum network. It is sealed in contracts and generates large incomes for its owners.

Lubin refers to decentralised autonomous entities in relation to DeFi systems. This system operates under peer-to-peer financial services on public blockchains. It utilizes a significant portion of Ether in the fundamental protocol or DAO.

Essentially, this means that not only does Ether have a smaller market value than Bitcoin, making it more sensitive to inflows, but a sizable percentage of its supply is also not available for use in ETFs.

Ethereum May not Fully Replicate BTC Gains

Analysts’ views differ, though. Since Ethereum ETFs based on futures, have only attracted a small portion of assets relative to their Bitcoin equivalents before spot ETF clearance, Vetle Lunde of K33 Research has highlighted the difficulties in duplicating Bitcoin’s success.

Over the previous three days, the net inflow to ETH ETFs based on Fut has been $126 million, approximately equal to the amount that BITX has received. Prior to spot clearance, the combined AUM of fut-based ETH ETFs was just 7.4%.