Ether Supply Crunch Imminent As SEC Approves Spot Ethereum ETFs: Report

Key Points:

• Ethereum ETF authorization may lead to Ether supply shortage.
• Over 27% of Ether is staked and unavailable for ETF acquisition.
• More network activity increases Ether burn, reducing supply.

Ethereum ETFs may cause an “Ether Supply Crunch”. Over 27% of Ether is staked or engaged, making it unavailable. Increased network activity could further reduce supply.

After months of silence, the Securities and Exchange Commission seems ready to authorize Ethereum spot exchange-traded funds.

SEC Authorization Ignites Anticipation of Ether Demand Surge

That will send Ether demand soaring, possibly even creating a supply shortage, according to Joe Lubin, Ethereum co-founder and CEO and founder of crypto infrastructure company Consensys.

Lubin reportedly said that institutions already invested in Bitcoin via newly launched ETFs would likely want to diversify their holdings and might turn to Ethereum.

However, the anticipated ‘floodgate’ of demand for Ether might be met with a scarcity of supply.

Readmore: SEC Leans Toward Spot Ethereum ETF Approval: Report

Ether Supply Crunch: Potential Scarcity Amidst Rising Demand

Where Bitcoin ETFs could rely on exchanges and over-the-counter counterparties to acquire more coins, the situation is more complex for Ethereum.

Onchain data shows more than 27% of the total supply of Ether is currently staked across the Ethereum network, locked in contracts, and earning yields for its owners.

A significant portion of Ether is engaged in the core protocol, DeFi systems, or in decentralized autonomous organizations, making it unavailable for acquisition by an ETF.

Ethereum Network Activity and Future Implications for Supply

Also, contrary to Bitcoin, not only is Ether’s market value lower making its price more reactive to inflows but a huge amount of supply is inaccessible for the consumption of the ETF.

Moreover, increased activity on the Ethereum network will mean more Ether is burned over time, which further reduces the supply.

In the case of Bitcoin, banks were so eager to acquire coins for their ETFs that they contacted major Bitcoin mining companies to access their holdings. In this case, the supply squeeze for Ethereum ETFs might be even greater.