Author: Kairos Research
Compiled by: TechFlow
CT has a unique talent for endlessly arguing about trivial issues while being blind to the forces that are truly reshaping the market. Despite the volatility during this week’s correction, inflows into ETF issuers for Bitcoin (BTC) and Ethereum (ETH) have continued. As of now, BlackRock and Fidelity’s ETFs have accumulated a large amount of BTC and ETH, surpassing many of their crypto-native peers, making them one of the largest holdings of the two leading digital assets.
For Bitcoin (BTC):
After 141 trading days, the net inflow of BTC ETFs is now about $18 billion. BlackRock currently holds 340,000 BTC, worth about $19.5 billion, and Fidelity holds 193,000 BTC, worth $11.2 billion.
Compared to cryptocurrency-native peers and other entities:
Bitfinex holds 203,000 BTC
Kraken holds 186,000 BTC
Wrapped Bitcoin (wBTC) holds 151,000 BTC
Robinhood holds 140,000 BTC
OKX holds 121,000 BTC
Tether holds 75,000 BTC
For Ethereum (ETH):
In just 11 trading days, ETH ETFs have seen $132,000 in net outflows, mostly due to outflows from Grayscale ETHE, which we attribute to higher management fees and profit-taking by investors who bought at a significant discount to NAV. Nonetheless, BlackRock’s ETHA has accumulated 260,000 ETH, worth about $634 million, in this short period of time. Fidelity has also received significant inflows, totaling 105,000 ETH, worth $256 million.
Compared to cryptocurrency-native peers and other entities:
Linea holds 188,000 ETH
Gate.io holds 171,000 ETH
Polygon holds 160,000 ETH
zkSync holds 138,000 ETH
Bithumb holds 122,000 ETH
KuCoin holds 110,000 ETH
Scroll holds 102,000 ETH
Compound holds 71,000 ETH
A good day of fund flows for the ETH ETF is equivalent to the launch of a top 10 Layer 2 project. As on-chain demand drivers through DeFi primitives continue to drive on-chain usage and demand for the underlying token, a feedback loop begins to form with ETF fund flows.
At the same time, the ETH balance on exchanges continued to decrease.
As Bitcoin DeFi begins to see a resurgence with the advent of Bitcoin staking and Bitcoin Layer 2, we expect to see more on-chain demand drivers emerge in the ecosystem as well, creating more supply channels for crypto’s largest asset.
Looking ahead, we foresee the SOL ETF performing similarly to what the ETH ETF currently does, but with a large portion of SOL’s supply being staked, with a collateralization ratio of 65%, compared to Ethereum’s collateralization ratio of ~27%. Additionally, as key metrics used by Solana continue to climb, it stands to reason that various on-chain supply channels will continue to emerge. Additionally, the path to approval of the SOL ETF is starting to become clearer as the SEC withdrew its request to classify Solana as a security in the ongoing Binance lawsuit. Notably, ETH and BTC were not named when the lawsuit was originally filed.
Overall, flows into digital asset ETFs continue to remain strong, not only from a USD denominated perspective, but also from a structural supply perspective. While volatility is certainly unbearable, these daily double-digit market corrections provide clients of the world’s largest asset managers with a favorable entry point to gain exposure to the most exciting asset class of this century. There are a limited number of tokens, but many demand drivers.
Disclaimer:
The information provided by Kairos Research (including but not limited to research, analysis, data or other content) is for informational purposes only and does not constitute investment advice, financial advice, trading advice or any other type of advice. Kairos Research does not recommend buying, selling or holding any cryptocurrency or other investment.
