Is it the ongoing capital reallocation within Bitcoin or the influx of new investments that's driving Ethereum's price surge?
In the world of cryptocurrency, a significant shift is underway. Ethereum (ETH), the second-largest digital asset by market capitalisation, has seen a surge in institutional investment this year, surpassing the total inflows recorded in all of 2023.
This trend is evident in the record-breaking inflows into spot Ethereum Exchange-Traded Funds (ETFs). Since their launch in July 2024, U.S. spot ETH ETFs have attracted over $9.6 billion in net inflows, with a staggering $5.3 billion poured in during the last 18 days alone. This sustained demand represents new capital entering ETH directly.
Large investors, or "whales," are also accumulating ETH at an impressive rate. Over a 48-hour period, these whales have amassed more than 220,000 ETH, increasing their holdings to about 28.4 million ETH, or 23.5% of the circulating ETH supply. Such accumulation signals strong long-term confidence and fresh buying, rather than just a rotation between crypto assets.
The decrease in ETH's volatility despite rising inflows also points towards long-term, measured accumulation by institutions, rather than speculative retail-driven trading or short-term switching from Bitcoin.
Ethereum's unique role and supply constraints further support this narrative. With a capped issuance of approximately 1 million tokens annually, combined with increased demand for programmable collateral and institutional treasury accumulation, there appears to be a genuine supply squeeze fueled by new demand, not just fund reallocation from Bitcoin.
Meanwhile, Bitcoin (BTC) has also seen a 14% increase this month, reaching an all-time high (ATH) above $123,000. However, the Bitcoin Realized Capitalization, which reflects the total acquisition cost of all BTC in circulation, factoring in accumulation trends and large-scale selling, indicates that the capital invested in bitcoin is rising, not declining.
Analyst Carmelo Aleman suggests that bitcoin's price pauses might be due to capital accumulation phases before exponential rallies, as observed in past bull cycles.
Investors are not dumping BTC for ETH and other altcoins. Instead, they are allocating fresh capital to their other crypto holdings. Ethereum investment products have recorded their second-largest weekly inflow at $1.59 billion, indicating a steady interest in Ethereum.
As of July 25, bitcoin reached a new ATH in Realized Cap at $1.018 trillion, while Ether has climbed over 60% this month, from $2,400 to $3,850.
In conclusion, the evidence suggests that fresh inflow from investors, rather than capital rotation from Bitcoin, is driving the recent Ether rally. This shift in investment patterns underscores the growing significance of Ethereum in the cryptocurrency market and the increasing interest from institutional investors.
- Institutional investors have been pouring significant amounts of capital into Ethereum (ETH), with record-breaking inflows into spot ETH Exchange-Traded Funds (ETFs) this year, marking a surge in institutional interest in Ethereum.
- Large investors, commonly referred to as "whales," are accumulating ETH at an impressive rate, indicating strong long-term confidence and fresh buying, not just a rotation from Bitcoin.
- While Bitcoin (BTC) has also seen an increase in value this month, the Biden administration's recent proposal for increased tax reporting requirements for crypto transactions may influence the allocation of fresh capital to other crypto holdings like Ethereum, rather than solely investing in Bitcoin.
