Original Title: Ethereum Supply Tightens as Staking and ETF Demand Reduce Liquid Float
Original Author: Itai Smidt, Investing.com
Editor's Note: In late August, ETH emerged from a relatively weak performance seen for most of the year. From August 19 to 21, ETH rose from about $1916 to a peak of $2546, with a significant increase that outperformed BTC in the same period. Following this, the price did not quickly retrace but instead consolidated at high levels around $2500, with the ETH/BTC exchange rate also significantly rebounding from its mid-year low.
This round of increase was first ignited by an improvement in risk appetite and short squeezes, but the article truly discusses the supply-demand changes behind the uptrend: US spot Ethereum ETF saw a net inflow of nearly $700 million in one week, about 42 million ETH entered staking, and the exchange balances decreased by about 15% since early June, while corporate treasuries continued to accumulate. Several forces are combining to compress the amount of ETH that can be sold immediately.
Author Itai Smidt indicates that the circulating supply of ETH has noticeably tightened compared to June, and as new funds enter into a thinner market, there may be greater price volatility. However, a decrease in supply does not necessarily mean that prices will rise; this round of market performance also includes a significant amount of short covering and leveraged funds, and the sustainability of ETF inflows has not yet been fully verified.
Therefore, what the market needs to confirm next is not only whether ETH can break through $2550 but also whether institutional funds can continue to flow in, whether the ETH/BTC rate can maintain its rebound, and whether staking and corporate holdings will continue to absorb new supply. These variables will determine whether this upward movement is a rapid squeeze or a harbinger of a relative pricing correction for ETH.
Following is the original text translated:
In August, ETH finally shook off a prolonged period of relative weakness.
From August 1 to 21, ETH rose from about $1867 to a high of $2545.88, with a cumulative increase of about 36%. Most of this increase concentrated from August 19 to 21: ETH rose nearly 20% over three days, while BTC increased about 7%, marking the first time since 2026 that ETH has significantly outperformed BTC in a main uptrend.
The market then entered a high-level consolidation. ETH attempted several times to break through the $2500 to $2550 range but encountered selling pressure each time. As of the original text's publication, the price was still hovering around $2450, less than 4% from the recent high. This indicates a strong profit-taking pressure above $2500, but the market has not yet clearly retraced to the pre-uptrend range.
The author believes that the key to this round of market activity is not just the increase in price. Simultaneously happening are the inflow of ETF funds, increased staking scale, decreased exchange balances, and accumulation by corporate treasuries, all of which have further reduced the tradable chips in the market since mid-year.
In such a structure, even if the scale of new funds is limited, it may produce a greater price impact. However, this logic still requires verification through the flow of funds and price performance.
Short Squeeze Ignited the Market, but Not Enough to Confirm Trend Reversal
In the first seven months of this year, ETH's performance has lagged behind BTC. By mid-year, the ETH price had fallen by about 32%, while BTC's drop was about 11%, a gap of more than 20 percentage points in relative performance.
The prolonged underperformance also led to a large accumulation of short positions in ETH. The article noted that the increase in mid-August was amplified by a short squeeze involving about $2.9 billion in short positions; from August 23 to 24, there were still around $60.61 million in ETH short positions being liquidated.
From the market mechanism perspective, a short squeeze refers to a price increase that forces shorts to cover their positions, and this covering can drive prices higher. It can create a sharp upward movement in the short term but cannot independently prove that the fundamentals or long-term trends have changed.
A relatively positive aspect of this round of market activity is that ETH did not immediately retrace most of its gains after a rapid rise. The ratio of BTC and ETH retreating from their respective high points is similar, meaning the relative advantage ETH previously obtained has been temporarily maintained.
The ETH/BTC exchange rate has also rebounded from a low of about 0.025 in June to around 0.033, a cumulative rebound of about 32%. This change indicates that the market has begun to re-evaluate ETH’s valuation relative to BTC, although the current exchange rate is still far below the highs of the last cycle.
The author regards 0.033 as a key observation line. If ETH/BTC can break through and stabilize at that level, the rotational logic of funds may be strengthened; if it falls below 0.030 again, it would indicate that the relative strength this round may still primarily come from short covering.
ETF Weekly Inflow Near $700 Million, Institutional Demand Rebounds
The ETF is the most quantifiable part of the new demand for ETH in this round.
As of the week ending August 21, US spot Ethereum ETFs saw a total net inflow of about $697 million, the highest weekly level since 2026; among this, the net inflow on August 21 alone was about $185 million. During the same period, the net inflow into Bitcoin spot ETFs was about $1.918 billion, with the two types of products absorbing about $2.62 billion in total.
From daily data, Ethereum ETFs had a net inflow for five consecutive trading days from August 17 to 21, with amounts approximately $30.85 million, $71.47 million, $189 million, $221 million, and $185 million, indicating that funds did not concentrate on a single trading day.
Based on this, the author believes that institutional demand has rebounded. However, the simultaneous occurrence of ETF inflows and ETH price increases only indicates a strong correlation between the two and is not sufficient to attribute all gains to ETF buying. Improved risk appetite, short covering, and the expansion of leveraged positions are also amplifying price volatility.
The concentration of funds also needs to be treated with caution. The article notes that on certain trading days, a single issuer absorbed about 78% of net inflows into Ethereum ETFs. A few large funds dominating demand can push prices up in the short term, but it also means that the stability of buying depends on a limited number of participants.
The next potential catalyst comes from ETF staking. If regulators allow US spot Ethereum ETFs to participate in staking, related products could not only gain exposure to ETH prices but also share in network staking rewards, thereby improving their total return attractiveness relative to BTC ETFs. However, before formal approval, this still remains a policy expectation and cannot be counted as confirmed demand.
42 Million ETH Enter Staking, Exchange Balances Decrease by 15%
Compared to the rapidly changing ETF flows, adjustments in ETH supply structure may have more long-term significance.
According to data cited in the original article, approximately 41.7 million to 42 million ETH are currently in staking, accounting for about a third of the total supply. Meanwhile, the amount of ETH held by exchanges has decreased from about 7.7 million in early June to 6.54 million by mid-August, a drop of about 15%, equivalent to 1.16 million ETH leaving trading platforms.
Staking means holders put their ETH into the Ethereum proof-of-stake network to participate in validation and earn rewards. ETH in staking is not permanently locked, but withdrawing and selling requires certain processes, and its immediate liquidity is usually lower than that of assets held on exchanges.
A decrease in exchange balances does not mean these ETH will never be sold, but it can reduce the number of chips that can be immediately traded in the market. When ETFs, corporate treasuries, and other large buyers enter simultaneously, the thinner trading depth may amplify price fluctuations.
The author believes that this partially explains the difference in the increases between ETH and BTC in this round of market activity: the approximately $697 million weekly net inflow into Ethereum ETFs corresponds to nearly 20% of the phase increase in ETH, while the larger inflows into Bitcoin ETFs brought relatively limited short-term gains.
However, this comparison does not eliminate differences in leverage, market depth, and short positions. More accurately, tightening supply may have increased ETH's sensitivity to new demand rather than solely determining its rise.
Since Ethereum completed its merge and switched to a proof-of-stake mechanism, the new issuance has significantly dropped compared to the previous proof-of-work period, thereby reducing long-term dilution pressure. The original article, therefore, argues that ETH’s supply structure is more favorable than before, but an increase in staking scale should not be simply equated to "supply disappearing": a significant portion of the assets participating in staking may already come from long-term holders with lower intent to sell.
In contrast, a decrease in exchange balances is more closely related to the active choices of holders, making it a more meaningful supply indicator according to the author.
BitMine Holds Nearly 5% of ETH, Structural Buying Accompanied by Concentration Risks
Corporate treasuries are becoming a new variable in the demand structure for ETH.
BitMine disclosed that as of August 24, the company holds 5.8476 million ETH, an increase of 32,447 from the previous week, with an average cost of about $2440; of which approximately 5.0673 million have already participated in staking. Based on the company’s cited total ETH supply of about 120.7 million, their holdings represent about 4.8%.
This scale is already close to 90% of the ETH balance referred to in the original article. The holdings and purchase rhythm of a single company are enough to affect the marginal supply and demand of ETH.
BitMine considers holding 5% of the total ETH supply as part of its "Alchemy of 5%" goal. According to the company's disclosed holdings, it is close to this target. However, corporate plans cannot be directly viewed as confirmed buying, and future purchases still depend on equity financing capabilities, company valuations, and market conditions.
Corporate treasuries can provide a demand structure that is relatively insensitive to price while also increasing holding concentration. If financing conditions deteriorate, stock prices come under pressure, or treasury strategies adjust, concentrated holdings may convert into potential supply.
Therefore, BitMine’s increased holdings have a positive bias on short-term supply and demand for ETH, but their long-term impact is not solely favorable. The market needs to pay attention not only to the scale of their purchases but also to the sources of funds, staking ratios, and balance sheet resilience.
Whether a New Round of Market Activity Can Establish Depends on Three Verifications
After a rapid rise, ETH’s short-term technical indicators have become notably hot.
The multiple data metrics compiled in the original article indicate that the daily relative strength index (RSI) for ETH briefly surged to the range of 75 to 85, surpassing the typical 70 level used to indicate overbought conditions. MACD has flattened at high levels, indicating that prices remain firm, but new momentum is beginning to weaken. The Fear and Greed Index also rose from 46 on August 19 to 73 to 74, with sentiment quickly shifting from caution to greed.
$2500 to $2550 is currently the most clear pressure area. ETH has made several attempts to break through this range recently but has been met with selling pressure; an important support platform below is located around $2330 to $2360.
Tightening supply provides ETH with better price volatility but cannot guarantee a one-sided continuation of the market. To judge whether a new trend can establish, the following three variables need to be observed:
First, can the ETF maintain net inflows? The author considers a weekly inflow of $300 million as a reference level; if funds continue to flow in, the probability of ETH challenging $2550 again may increase. If the ETF quickly turns to net outflows, the sustainability of the August buying will be questioned.
Second, can ETH/BTC stabilize at 0.033? If the relative exchange rate continues to strengthen, it suggests the market may shift from a dollar price rebound to a continuous repair of ETH relative to BTC.
Third, can the price break through $2550 and hold the support at $2330 to $2360? An upward breakthrough will strengthen the trading logic of tightening supply; if it breaks below the consolidation platform, it would indicate that leverage and short covering might still be the main driving forces behind this round of price surge.
ETH's supply structure has tightened further since June, and ETFs and corporate treasuries have brought new demand. However, until $2550 is effectively breached, "a new round of market activity" remains a market judgment awaiting verification.
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