An analyst believes that the price of Ether (ETH) is set to increase, noting that 40% of Ether is currently out of circulation due to unprecedented institutional demand.
“Ethereum has never encountered a market cycle with all three supply vacuums in effect simultaneously,” stated analyst “Crypto Gucci” on Tuesday.
He pointed out that digital asset treasuries (DATs) were not present in the previous market cycle. Recently, DATs have collected an impressive 5.9 million ETH, valued at around $24 billion and representing 4.9% of the total supply, according to StrategicEthReserve.
These entities plan to retain the asset for long-term yields.
Spot Ether exchange-traded funds were also not present in the last cycle.
Currently, US-based ETFs have acquired 6.84 million Ether valued at $28 billion, equating to 5.6% of the total supply, despite the lack of staking approval.
Furthermore, while staking was in its initial stages during the last market cycle, today there are 35.7 million ETH staked, worth about $146 billion, representing nearly 30% of the total supply. Much of this is illiquid due to a lengthy exit queue, which currently stands at 40 days.
Crypto Gucci emphasized that Ether has entered this cycle with record institutional interest and the smallest liquid supply in its history.
“When demand intersects with a diminishing supply like this, prices don’t just rise; they soar.”
“With institutional bidding and [ETF] staking approval, I predict ETH will surge significantly,” remarked entrepreneur Ted Pillows earlier this week, forecasting a fair value between $8,000 and $10,000 in this cycle.
Related: Ether ‘3-wave pullback’ expected to conclude soon, $5.5K next: Fundstrat
The Ether supply is currently slightly inflationary, having grown by just 0.5% since the Merge in 2022, when it transitioned from proof-of-work to proof-of-stake, according to Ultrasound.Money.
In comparison, the Bitcoin (BTC) supply has increased by 4% during the same timeframe.
Could Nation-States Be Next?
Another potential factor that may create a fourth supply vacuum is if nation-states begin accumulating Ether for their crypto reserves.
This week, the Kingdom of Bhutan announced plans to build on Ethereum by integrating its national ID system into the blockchain, although it currently does not possess any ETH.
“It’s exciting that Bhutan is developing on Ethereum,” commented Ryan Sean Adams from Bankless. “However, if Ethereum is unable to translate its building efforts into actual ETH holdings as a store of value, it may fail to fulfill its cypherpunk aspirations,” he added.
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