The launch of a spot Ethereum ETF could lead to a supply crunch, according to crypto accounting software firm Integral on June 3. This projection is similar to the sentiment before the launch of spot Bitcoin ETFs earlier this year, which have since seen record inflows and a notable decrease in BTC supply on centralized exchanges.

Ethereum supply crunch

Integral expects ETF issuers to buy and hold large amounts of ETH, removing it from open markets and driving up the price. Crypto entrepreneur Oliver Isaacs noted that over $3 billion worth of ETH has left exchanges since the SEC approved spot ETH ETFs on May 23, reducing ETH exchange reserves to a six-year low.

Integral also highlighted that staking trends will intensify the supply crunch, with about 25% of the ETH supply currently staked. While ETF issuers will not stake directly, staking participants could benefit from rising prices.

Additionally, Integral believes these approvals will boost institutional adoption of ETH and legitimize crypto as an asset class, potentially triggering an “altcoin season” as demand for ETH spreads to other cryptocurrencies. Spot ETH ETFs are expected to launch soon.

IBIT accounts for 25% of BlackRock flows

Many are watching to see if Ethereum will follow Bitcoin's trend after the January launch of spot Bitcoin ETFs. These ETFs have solidified Bitcoin's status in traditional finance, with BlackRock and Fidelity’s IBIT and FBTC experiencing significant growth.

Eric Balchunas, a Bloomberg ETF analyst, reported that BlackRock’s IBIT has accounted for 26% of the company's $65 billion ETF inflows since the beginning of the year. BlackRock, the largest US ETF issuer, has 429 ETFs and IBIT has seen $16.7 billion in inflows since its launch.

Fidelity’s FBTC fund represents 56% of its $15.8 billion total ETF flows this year, with $8.9 billion in total inflows to date. Fidelity manages 70 ETFs.

Balchunas’ data shows that BlackRock and Fidelity are the second and fifth leading ETF issuers based on year-to-date flows, ranking first and second respectively among firms with a spot Bitcoin ETF.