There is also much anticipation, and an accompanying rise in cryptocurrency speculation, that Ether will surpass its November 2021 highs of $4,867.60 when the Ether ETFs become available. Indeed, the supply dynamics of Ether, which is currently the second-largest cryptocurrency in the world, have very similar features to Bitcoin, which at one time was the only cryptocurrency in town. With Ether, just like Bitcoin, scarcity amplifies the impact of the introduction of ETFs when they become available later this year. With Ether, almost 40 per cent of the cryptocurrency’s supply is locked away, either through staking or in smart contracts.
The Ether ETFs that are expected to launch later this year will likely be much smaller than Bitcoin’s ETFs – which had close to $38 billion of assets – but, since Ether’s market capitalisation is only a fraction of Bitcoin’s, similar inflows may still lead to significant pricing effects. On the other hand, many analysts believe that the potential market impact has already been priced in to current Ether prices. The other big risk that now looms over the crypto space and may affect its valuation dynamics moving forward is the influence of outside market factors and regulatory developments.
In sum, though Ether ETFs could trigger large and lasting market moves, it’s hard to predict how they will interact with the market’s other forces and regulatory constraints. Investors and market-watchers should keep their eyes peeled as the new instruments launch and Ether’s market behaviour responds across the board to these and other influences.
Source: Reuters
