Spot Ethereum exchange-traded funds’ first month was brutal.
Rather than kick-starting the crypto rally pundits expected, spot Ethereum ETFs suffered $476 million in outflows in their first 30 days of trading following their July 23 launch.
However, market watchers hint that things may be about to change.
“The newbies couldn’t overcome the ETHE unlock, too powerful a force,” Bloomberg Intelligence ETF analyst Eric Balchunas posted on X, referring to outflows from Grayscale’s fund.
”Good news is that the unlock will end, there’s light at the end of the tunnel,” Balchunas added.
What’s the unlock?
Most US Ethereum ETFs were spun up from scratch. Grayscale’s fund is the exception. It previously existed as a trust and had $10 billion in assets shortly before converting into an ETF.
Prior to the conversion, the trust wasn’t designed to let investors redeem their shares — meaning funds were essentially stuck in the investment vehicle. Grayscale’s Ethereum Trust, or ETHE, converting into an ETF has unlocked those assets.
ETHE now only sports $4.7 billion in assets. Some of outflows went into to another Grayscale Ethereum ETF, called Grayscale Ethereum Mini Trust, which now has $924 million in assets.
That means the two biggest Ethereum ETFs currently belong to Grayscale. At $866 million in assets, BlackRock’s ETHA is only a hair away from the Mini Trust in terms of size. Fidelity’s fund, meanwhile, is a distant fourth at $334 million.
Different from Bitcoin
This is not a case of history repeating itself. True, spot Bitcoin ETFs also suffered significant outflows when they launched. Most of those outflows were from Grayscale’s GBTC.
However, the flows weren’t so violent, and they were mitigated by tremendous inflows — almost $21 billion, according to a CoinShares report released on September 2.
“The difference in the first weeks of Bitcoin ETF flows versus Ethereum ETF flows is glaring,” Quinn Thompson, founder of crypto hedge fund Lekker Capital, posted on X.
“Sure, Grayscale outflows are abating but there is zero interest/inflows to the other ETFs to offset,” Thompson added. “There is simply no smart money/traditional investor/whatever you want to call it demand for Ether at its current valuation.”
Ether’s price has fallen over 31% to trade at $2,387 since the spot Ethereum ETFs launched on July 23.
But for Balchunas, the outflows are only temporary. And with BlackRock CEO Larry Fink being so publicly vocal about the tokenisation opportunities that Ethereum presents, institutional interest seems bound to pick up.
“If I was an Ether person that is exactly the thought I would come back to to lift me up if I was down bad: We got Larry Fink on our team,” Balchunas posted.
Crypto market movers
Bitcoin fell 4% over the past 24 hours and now trades at $56,518.
Ethereum fell 5.1% to trade at $2,387.
What we are reading
‘No good deed goes unpunished,’ defunct crypto hedge fund says after settling SEC lawsuit for $225,000 — DL News
Ripple Expands XRP Ledger with Ethereum-Compatible Smart Contracts — Milk Road
21Shares Enters the Wrapped Bitcoin Market on Ethereum — Unchained
Sky Aave Force: Aave and Sky Join Forces to Bring DeFi to the Masses — Milk Road
North Korean hackers eye Bitcoin, Ethereum ETFs, FBI warns — DL News
Tom Carreras writes about markets for DL News. Got a tip about Trump, Harris, and crypto? Reach out at tcarreras@dlnews.com.
