According to a recent investor memo from Bitwise Chief Investment Officer Matt Hougan, Ethereum’s recent price rallies have been driven by a significant structural change in demand.
Since May 15, nearly 2.83 million ETH have been acquired, over $10 billion, due to a surge in exchange-traded funds (ETFs) and purchasing activities from companies.
This purchasing activity has led to a 32x new ETH issue, contributing to the imbalance of supply and demand that analysts say could last. Hougan explained that Ethereum prices have risen by more than 65% in the past month and 160% since April.
Market sentiment plays a role in cryptocurrency movement, but Bitise executives are attributable to this surge, particularly the gap between the amount of ETH being purchased and the amount produced in the chain. In his view, the current dynamic reflects what happened with Bitcoin after the launch of the Spot BTC ETF in early 2024.
ETFs and businesses are driving the accumulation of ETH
The reversal of Ethereum trends came into effect in mid-May when the influx into the field gained momentum. According to Hougan, these investment vehicles have since drawn more than $5 billion. Meanwhile, the business association has begun placing ETH as a strategic asset within the Ministry of Finance.
Companies such as Bitmine Immersion Technologies (BMNR), Sharplink Gaming (SBET), BIT DIGITAL (BTBT), and Ether Machine (DYNX) have all announced large ETH holding or purchasing plans.
For example, Sharplink Gaming has acquired over 280,000 ETH, while Bitmine has accumulated over 300,000 ETH. BIT Digital sold Bitcoin Reserve to earn over 100,000 ETH, indicating a change in institutional preferences for Ethereum.
Not only do these companies have made substantial acquisitions, they also publicly outline long-term ETH strategies, indicating a structural commitment to their assets.
Outlook suggests a continuous demand momentum
It seems likely that the upward trajectory of demand will continue. Hougan has an ETH market capitalization of approximately 20% of Bitcoin, but ETH ETFs still account for less than 12% of the assets managed by Bitcoin ETFs.
Bitiwise hopes that the trends in stable growth and tokenization, supported primarily by Ethereum, will narrow the gap as it attracts further capital inflows.
Additionally, Hougan highlights the growing appeal of ETH Treasury companies whose stock valuations are now trading at the underlying ETH holdings value and premium. This market condition encourages the accumulation of further ETH by public companies, especially if premiums remain.
He predicts that these entities will collectively purchase another $2 billion in ETH over the next year. This predicts that it could account for nearly seven times more demand than new supply, taking into account the estimated supply issuance of Ethereum at the time.
Although Ethereum does not share a hard cap for Bitcoin, Hougan emphasizes that short-term price actions are primarily determined by the supply and demand mechanisms. Given the current imbalance, he believes that rising prices could continue.
Whether this trend is maintained over the long term, Ethereum’s short-term price action appears to be increasingly influenced by institutional actions and financial adoption strategies.
Special images created with Dall-E, TradingView chart
