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Ethereum’s recent price rally is being fueled by a significant structural shift in demand, according to a recent investor note from Bitwise Chief Investment Officer Matt Hougan.
Since May 15, a surge in buying activity from exchange-traded funds (ETFs) and corporations has resulted in the acquisition of nearly 2.83 million ETH, valued at over $10 billion.
This purchasing activity has outpaced new ETH issuance by a factor of 32, contributing to a supply-demand imbalance that analysts say could persist. Hougan explained that Ethereum’s price has climbed more than 65% in the past month and 160% since April.
While market sentiment plays a role in crypto asset movements, the Bitwise executive attributes this surge primarily to fundamentals, particularly the gap between how much ETH is being bought and how much is being created on-chain. In his view, the current dynamic mirrors what occurred with Bitcoin after the launch of spot BTC ETFs in early 2024.
ETFs and Corporations Drive ETH Accumulation
The trend reversal for Ethereum became evident in mid-May, when inflows into spot Ethereum ETFs gained momentum. According to Hougan, these investment vehicles have pulled in over $5 billion since then. Meanwhile, corporate entities have begun positioning ETH as a strategic asset within their treasuries.
Companies like Bitmine Immersion Technologies (BMNR), SharpLink Gaming (SBET), Bit Digital (BTBT), and The Ether Machine (DYNX) have all announced large ETH holdings or purchasing plans, with Bitmine alone targeting 5% of total ETH supply.
SharpLink Gaming, for instance, has acquired more than 280,000 ETH, while Bitmine has amassed over 300,000 ETH. Bit Digital sold its Bitcoin reserves to acquire more than 100,000 ETH, signaling a shift in institutional preferences toward Ethereum.
These companies are not only making sizable acquisitions but also publicly outlining long-term ETH strategies, indicating a structural commitment to the asset.
Outlook Suggests Continued Demand Momentum
The upward trajectory in demand appears likely to continue. Hougan notes that although ETH’s market capitalization is about 20% of Bitcoin’s, ETH ETFs still account for less than 12% of the assets under management held in Bitcoin ETFs.
Bitwise expects that gap to narrow as stablecoin growth and tokenization trends, both primarily supported by Ethereum, attract further capital inflows.
Additionally, Hougan highlights the growing appeal of ETH treasury companies, whose stock valuations are currently trading at premiums to the value of their underlying ETH holdings. This market condition incentivizes further ETH accumulation by public firms, especially if the premiums remain.
He projects that these entities could collectively purchase another $20 billion in ETH over the next year, which, given Ethereum’s estimated supply issuance of 800,000 ETH in that time, could represent nearly seven times more demand than new supply.
Though Ethereum does not share Bitcoin’s hard cap, Hougan emphasizes that short-term price action is largely dictated by supply and demand mechanics. Given the current imbalance, he believes the upward price movement could continue.
Whether or not this trend sustains over the long term, Ethereum’s near-term price action seems increasingly influenced by institutional behavior and treasury adoption strategies.
Featured image created with DALL-E, Chart from TradingView
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Data from on-chain analytics firm Glassnode shows that despite price volatility, rising inflation, and geopolitical tensions, the majority of the BTC supply has not left its wallet since the start of the year. It signifies the rising appeal of Bitcoin among institutional and retail investors, with nobody interested in selling it.
Glassnode tweeted on Monday that the Bitcoin Illiquid Supply Shock Ratio (ISSR), which represents the coins held in wallets with little to no history of spending, has ticked significantly higher this week.
Bitcoin Interest Rises Among Investors
The Bitcoin Illiquid Supply Shock Ratio, first developed by on-chain analyst Will Clemente, has been moving significantly higher since the start of the year. And, this week, the ratio jumps even higher. The illiquid BTC supply represents coins held in wallets with little to no history of spending. It is now 3.2 times larger than Liquid and Highly Liquid supply combined.
The #Bitcoin Illiquid Supply Shock Ratio, first developed by @WClementeIII, has ticked significantly higher this week.
Illiquid $BTC supply represents coins held in wallets with little to no history of spending. It is now 3.2x larger than Liquid and Highly Liquid supply combined pic.twitter.com/N0xejizRDE
— glassnode (@glassnode) March 13, 2022
The data is important as it implies that long-term hodlers are patiently hodling because they know what’s likely coming soon. Even Elon Musk says he is not planning to sell his Bitcoin, Ethereum, and Doge despite rising inflation. Musk’s tweet pushed crypto prices slightly higher on Monday, with Bitcoin rising nearly 2% to above $39,000.
Moreover, as per the historic price movement, a downtrend on two previous occasions in 2016 and 2020 followed and preceded a major bounceback in Bitcoin price action.
However, Other factors must also be considered, such as EU ministers are expected to vote on approving two versions of the MiCA bill, one with the POW ban and one without it. The high energy cost and carbon footprint of mining POW tokens is a sticking point for the EU parliament.
Meanwhile, over the weekend, a comparison of top assets by market cap indicates that Bitcoin, and are showing signs of traders expecting price rises. However, trader sentiment is negative on , as per a tweet from Santiment, a financial market data and content platform.
A comparison of #crypto‘s top assets by market cap reveals #Bitcoin, #XRPNetwork, and #BinanceCoin are showing signs of traders expecting price rises. Meanwhile, #Polkadot is one of the few top caps where trader sentiment is more negative than usual. https://t.co/nlBy5q9oMz pic.twitter.com/9QgSI5oV2E
— Santiment (@santimentfeed) March 13, 2022
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The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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