Supply Craped an ETF Excitement!

Ether has seen a large appreciation of almost 30% from February 6 to February 23, reaching the important resistance level of $3,000. This increase is due to a combination of circumstances, including a decrease in supply, whales buying ether, increased demand for staking, the popularity of decentralized finance (DeFi) applications, and the adoption of ethereum’s proof-of-stake burning mechanism , which has effectively reduced the total amount of ether in circulation.

Decrease in the supply of ether

The decline in ether supply is significant, with a net drop of 18,960 ETH in the past month, according to data from ultrasound.money. Notably, the 7-day average trend shows a preference for net withdrawals from exchanges since February 15, indicating a possible easing of selling pressure, despite the volatility seen in early January where the price of ether remained stable around $2,300.

Spot ether exchange-traded fund (ETF)

Crypto investor Ryan Sean Adams has stated on X that Ethereum may not yet have reached its peak in demand. He speculates that the introduction of a spot ether exchange-traded fund (ETF) could significantly boost the price of ether, especially due to the scarcity of new supply. The potential for an ETF has sparked debate among analysts, with approval chances estimated at between 50% and 80%.

Ethereum hasn’t even seen its demand season yet.

When it does we have no idea how high price will go.

So much ETH in staking, and restaking, and defi, and getting burnt this cycle – no new supply.

Add an ETF to that?

There’s not enough ETH to go around.

— RYAN SΞAN ADAMS – rsa.eth (@RyanSAdams) February 15, 2024

Bitcoin’s influence on ether

Despite ether’s impressive rally, the question remains whether it can flip $3,000 from resistance to support. Factors such as bitcoin’s bullish momentum and institutional investor inflows play a crucial role, given the historical price correlation between BTC and ETH. However, a decoupling between bitcoin and ether correlation, especially with the bullish sentiment surrounding the potential approval of an ethereum ETF, obviously remains an option.

To assess market sentiment towards ether, analysts look at the premium of ether 1-month futures over regular spot markets. Normally, a premium of 5% to 10% indicates neutral market sentiment. Since February 17, this premium has remained above 14%, indicating continued interest in leveraged long positions. This shows that people are still bullish on ether.