Spot ETF Inflows to Have a Weaker Effect on Ether than Bitcoin: CryptoQuant

The first wave of Ethereum spot exchange-traded funds (ETFs) in the United States debuted on July 23, with inflows exceeding $100 million. While the positive flows indicate a strong start for the funds, ether (ETH) may not witness the parabolic uptrend that bitcoin (BTC) saw after asset managers launched their ETF at the beginning of the year.

In CryptoQuant’s latest weekly crypto report, blockchain experts explained that new money flows into digital asset products like ETFs would have a weaker effect on ETH than BTC due to different effects network multipliers.

ETH multiplier lower than BTC

According to analysts, Ether’s multiplier is lower than bitcoin and has remained low in 2024. The multiplier is the ratio of market capitalization change to realized capitalization. This means that the market value of Ether is less responsive to the new inflow of investment money. For every $1 of fresh money invested in bitcoin, the market capitalization of the asset has grown by $5. However, Ether’s market cap has increased by $1.34 for every $1 invested.

The CryptoQuant report further outlined other factors that could prevent ETH from experiencing the post-launch growth of the bitcoin ETF. One of them is the growing supply of Ether.

Since the Ethereum developers rolled out the Dencun update to the network in March, the supply of Ether has been increasing. Dencun introduced a mechanism that allowed data smudging and drastically reduced transaction fees; lower transaction fees translated into a decrease in ETH burned.

The supply of ETH is increasing

Prior to Dencun, Ethereum implemented updates that ensured the network remained deflationary by burning a portion of transaction fees. Since Dencun, the supply of ether has been increasing at a high rate, the fastest since The Merge in September 2022. At the time of publication, ETH had a total and circulating supply of 120.22 million, but no maximum supply. By contrast, BTC has a supply limit of 21 million.

Analysts said the structural change in Ethereum’s monetary policy is causing the network to lose its ultrasonic monetary narrative. The ultrasound concept insists that Ethereum has the potential to be more robust than Bitcoin by using features that preserve purchasing power and reduce the supply of ETH over time.

While the price of ETH appears to have bottomed out and indicators point to positive momentum, the asset’s spot trading volume on centralized exchanges still needs to be taken into account. Since January, ether’s spot volume has been 85% that of bitcoin over the same period and 58% that of the leading cryptocurrency since 2020.

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