Ethereum Price Poised for Upside as Supply Shrinks by 1.3% Annually

A prominent crypto strategist has highlighted a significant shift in the narrative surrounding Ethereum (ETH), suggesting that capital is increasingly flowing into the cryptocurrency. This change in sentiment is attributed to several factors, including the growing institutional interest and the implementation of the Ethereum Merge, which has led to a reduction in the supply of ETH.

The strategist noted that the Ethereum Merge, which transitioned the network from a proof-of-work to a proof-of-stake consensus mechanism, has resulted in a deflationary effect on ETH. According to the analyst's forecast, the post-Merge burn has removed approximately 332,000 ETH from circulation, causing the base-line inflation to turn negative at -1.3% per year. This reduction in supply, coupled with increasing demand, is expected to drive the price of ETH higher.

The strategist also pointed out that institutional investors are increasingly allocating funds to Ethereum. For instance, GameSquare, a company focused on the gaming industry, has initiated an Ethereum treasury strategy. The company started with an $8 million offering and plans to allocate up to $100 million in ETH over time. This move by GameSquare is indicative of a broader trend where institutions are recognizing the potential of Ethereum as a store of value and a medium of exchange.

The changing narrative for ETH is also supported by the growing demand for Ethereum-based products and services. The strategist highlighted that the strong ETF inflows and institutional demand have contributed to the recent surge in the price of Ethereum. This demand is expected to continue as more institutions and retail investors recognize the value proposition of Ethereum.

In a question-and-answer exclusive, Fundstrat managing partner Tom Lee says that Ethereum will come back to life amid increasing stablecoin adoption. “Stablecoins are being pushed by the United States government. Here’s the thing. Circle (USDC) runs on Ethereum. Stablecoins run on Ethereum. So as stablecoins explode, Ethereum is the backbone for stablecoins. So I think Ethereum is going to make a big comeback as well.”

Pseudonymous analyst Pentoshi tells his followers on the social media platform X that he’s targeting $3,200 for Ethereum but notes that ETH can print new all-time high prices. Pentoshi says the macro picture is changing for Ethereum in a meaningful way. “You can see the narrative changing around ETH right now. And in my opinion, it will be obvious in hindsight. But most are too jaded. In less than one month, public companies will have bought enough ETH to offset all the ETH that’s been created since the Merge. It’s 1/9th the market cap of BTC, and takes far less capital to move. That capital is clearly coming. It’s still very early for this trade. I don’t know if it will be today, tomorrow, or next month. But I think we are going to look back at what is right in front of your eyes and think, I can’t believe it was so obvious. The amount of capital starting to flow into ETH, will lead to big moves. And all we have to do, is do nothing. Set the tribalism aside, set the past aside. All you have to do is set your bias aside and look at what’s happening. Hate it or love it. It seems inevitable.”

Based on these factors, the strategist has set an upside price target for Ethereum. While the exact target was not disclosed, the strategist's analysis suggests that the price of ETH has the potential to appreciate significantly in the coming months. This optimistic outlook is underpinned by the deflationary supply dynamics, increasing institutional interest, and growing demand for Ethereum-based products and services.

In conclusion, the crypto strategist's analysis paints a bullish picture for Ethereum. The changing narrative, driven by the Ethereum Merge and increasing institutional interest, is expected to attract more capital to the cryptocurrency. As a result, the price of ETH is poised for significant upside potential, making it an attractive investment opportunity for both institutional and retail investors.