The launch of a spot Ethereum ETF could lead to a supply crunch, according to crypto accounting software firm Integral on June 3. This mirrors the anticipation surrounding spot Bitcoin ETFs before their launch earlier this year. Since then, Bitcoin ETFs have seen record inflows, with BTC supply on centralized exchanges decreasing significantly.

Integral expects that ETF issuers will acquire and hold substantial amounts of ETH, reducing the available supply and driving up prices. This trend appears to be starting, as noted by crypto entrepreneur Oliver Isaacs, who reported that over $3 billion of ETH had been withdrawn from exchanges since the SEC approved spot ETH ETFs on May 23, bringing ETH exchange reserves to a six-year low.

Integral also mentioned that ongoing staking trends will exacerbate the supply crunch, with around 25% of the ETH supply currently staked. While ETF issuers won't directly engage in staking, those who do will benefit from rising prices. Moreover, Integral believes that ETF approvals will boost institutional adoption of ETH and validate crypto as a legitimate asset class, potentially triggering an "altcoin season" as demand for ETH spills over into other cryptocurrencies.

Spot ETH ETFs are expected to launch in the near future.

Impact on BlackRock and Fidelity

Many are watching to see if Ethereum will follow Bitcoin's trend after spot Bitcoin ETFs began trading in January. The success of these Bitcoin ETFs has established Bitcoin as a viable investment in traditional finance, with BlackRock and Fidelity's IBIT and FBTC funds seeing record inflows.

BlackRock's IBIT has accounted for 26% of the company's $65 billion ETF inflows since the beginning of the year, with total inflows of $16.7 billion 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.

According to Bloomberg ETF analyst Eric Balchunas, BlackRock and Fidelity are the second and fifth leading ETF issuers based on year-to-date flows. They rank first and second among firms that have launched a spot Bitcoin ETF.