US Spot Ethereum Ethereum
+3.23%
Last week saw a contrasting start to the year for exchange-traded funds (ETFs), with net inflows into most ETFs being outpaced by net outflows from Grayscale’s convertible fund, ETHE.
Last Tuesday, nine new spot Ethereum ETFs from eight different issuers launched, following approval from the U.S. Securities and Exchange Commission in May.
In the first four days of trading, BlackRock’s ETHA led the way, generating $442 million in net inflows, followed by Bitwise’s ETHW with $265.9 million and Fidelity’s FETH with $219.4 million. VanEck’s ETHV, Franklin Templeton’s EZET, Invesco’s QETH, and 21Shares’ CETH also generated net inflows of $35.4 million, $23.3 million, $14.2 million, and $7.5 million, respectively.
In fact, almost all ETFs except Grayscale’s ETHE have seen inflows, with the notable exception of last week’s net outflow of $1.5 billion, bringing net outflows across all US spot Ethereum ETFs to $341.8 million.
This compares with a net inflow of $1.26 billion in the first four days of US spot. Bitcoin 
Bitcoin
+2.72%
ETFs launched in January. However, excluding ETHE, Ethereum ETFs have generated about 40% of the net inflows seen by Bitcoin ETFs since their January launch, with $1.17 billion compared to $2.89 billion excluding the similarly converted GBTC.
“Over $1 billion has come into spot Ethereum ETFs this week from the previous ETHE. Some of it has obviously been recycled from ETHE, but it’s nowhere near the primary driver of IMO,” ETF Store President Nate Geraci said Friday. “Think about the incredibly successful debut. Another way to think about it is that investors have wanted over $1 billion of ether exposure via the tradfi rail in *4* days,” he added.
Spot Bitcoin ETFs generated a total of $49.4 million in net inflows over the same four-day period last week, with BlackRock’s IBIT leading the way with $231.8 million inflows, although Valkyrie’s Friday trading BRRR data is still pending at the time of writing. Bitcoin ETF numbers have fallen significantly since the launch of the Ethereum ETF, which saw net inflows of $485.9 million on Monday.
The overwhelming influence of Grayscale’s ETHE
Grayscale Ethereum Trust was initially launched as a private offering in 2017. In mid-2019, the shares began trading publicly on OTC Markets under the ticker ETHE. This continued until July 23, when ETHE was listed on NYSE Arca as one of the newly approved spot Ethereum ETFs.
ETHE also charges significantly higher fees, charging 2.5% compared to the 0.19% to 0.25% post-waiver fees of other issuers’ spot Ethereum ETFs. However, of the two existing Grayscale strategies, the additional Grayscale Mini Trust Ethereum ETF product (ETH) charges the lowest fee at just 0.15%.
Of the approximately $10 billion worth of assets (2.9 million ether) held by the Grayscale Ethereum Trust prior to the transition, $9.2 billion worth of the startup funds were allocated to ETHE, while just over $1 billion was allocated to the ETH fund.
Grayscale’s ETH Mini Trust also saw net inflows last week, totaling $164 million. However, significant outflows from ETHE and the subsequent drop in the price of ether since the ETF’s launch have reduced AUM to around $7.5 billion (2.28 million ether), according to the fund’s page.
Of course, it’s still early days, and given Grayscale’s converted spot Bitcoin ETF, GBTC, net outflows are likely to slow. However, with net outflows currently averaging around $378 million per trading day, ETHE’s assets could be depleted in a matter of weeks.
“The biggest difference for me is the relatively large outflows on ETHE. I don’t think GBTC had that on day one because it was at a significant discount when it launched,” said Bloomberg ETF analyst James Seyffart, comparing outflows between the two products.
“The new 8 Ethereum ETFs aren’t as potent as the new 9 Bitcoin ETFs in offsetting Grayscale’s outflows, but the good news is that inflows/volumes are still very healthy and the intensity of ETHE unlocks will likely taper off faster than GBTC. The outlook is good, but the next few days could be tough,” added Bloomberg ETF analyst Eric Balchunas.
Ethereum ETF Trading Volume vs. Bitcoin ETF
The spot Ethereum ETF recorded a cumulative trading volume of $4.05 billion in its first week, which is 34% of the $11.82 billion recorded by the spot Bitcoin ETF in its first four days after launch.
In terms of spot Ethereum ETF volume, Grayscale’s ETHE had the largest market share on Friday, with around 52%, followed by BlackRock’s ETHA, Grayscale’s ETH, and Fidelity’s FETH with 21.7%, 12%, and 8.4% volume shares, respectively.
While Bitcoin ETF volumes have fallen to their current lows since launch, Ethereum ETFs accounted for 55% of the $7.35 billion in volume for Bitcoin ETFs over the same period last week.
Again, it is still early days and Ethereum ETFs may also experience a slowdown after their initial launch. However, inflows and volumes, excluding ETHE and GBTC, have been higher in Bitcoin ETF figures than analysts’ estimates of 15-25%.
According to The Block’s data dashboard, spot Ethereum ETFs quickly outpaced traditional Ethereum futures ETF products in terms of trading volume through Friday, capturing 99.3% of the market.
In contrast, spot Bitcoin ETFs have a trading volume market share of approximately 92.75% compared to Bitcoin futures ETFs.
A stagnant global picture
The launch of a spot Ethereum ETF in the US has further dampened global sentiment, with digital asset investment products seeing net inflows of just $245 million globally, according to a recent report from asset manager CoinShares.
Weekly cryptocurrency asset flows. Image: CoinShares.
Global Bitcoin investment products recorded net inflows of $519 million last week, taking July inflows to $3.9 billion. “We believe the renewed investor confidence was driven by the US election campaign rhetoric regarding Bitcoin as a potential strategic reserve asset and the increased likelihood of a Fed rate cut in September 2024,” wrote James Butterfill, head of research at CoinShares.
Butterfill also added that trading volumes in the US also increased to $14.8 billion last week, the highest level since May, on the strength of a new spot Ethereum ETF.
“The launch of a US physical Ethereum ETF has seen the largest inflows since December 2020, with newly issued ETFs seeing inflows of $2.2 billion and ETH ETP volume up 542%,” Butterfill said. However, that figure includes roughly $1 billion in seed funding for the Grayscale Mini Trust ETF (ETH), and when combined with $1.5 billion in net outflows from Grayscale’s convertible ETHE product, Ethereum-based investment products have seen a total of $285 million in net outflows globally last week.
According to Butterfill, cryptocurrency investment products now manage $99.1 billion in total assets globally, with net inflows this year reaching a record $20.5 billion.
According to The Block’s Ethereum price page, Ether is currently trading at $3,389, up 4.3% over the last 24 hours but down 3% over the past week.
ETH/USD price chart. Image: The Block/TradingView.
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