Ethereum
Ethereum ETFs See $341.8M in First-Week Net Outflows, Led by Grayscale’s ETHE
U.S. spot Ethereum exchange-traded funds had a mixed start to the week, with net inflows into most ETFs overshadowed by large net outflows from Grayscale’s converted fund, ETHE.
Farside Investors Data watch this place Ethereum (ETH) ETFs saw just over $162 million in total outflows on Friday, July 26, marking the third consecutive day of net negative flows. In contrast, spot Bitcoin (Bitcoin) AND F checked in $51.8 million in net inflows on the same day, continuing a trend of positive flows for three consecutive days.
The first spot Ethereum ETFs in the United States — nine products from eight issuers — started trading on Tuesday, July 23, following their approval by the Securities and Exchange Commission in May.
First week of ETH ETFs
During the first week of trading, most of the newly launched Ethereum ETFs saw positive inflows, with the exception of Grayscale’s ETHE, which saw net outflows of $1.51 billion. The ETHE outflows led to an aggregate weekly outflow of $341.8 million for the ETFs.
BlackRock’s ETHA led the way in terms of inflows, 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 and Franklin Templeton’s EZET saw smaller inflows of $35.4 million and $23.3 million, respectively. 21Shares’ CETH saw an inflow of just $7.5 million on launch day and saw no inflows over the next three trading days.
Ethereum ETF Transaction Flow in First Week of Trading | Source: Other side
Grayscale’s Two Ethereum ETFs, Explained
Grayscale, a leading crypto asset manager, launched two Ethereum spot funds last week, trading under the ticker symbols ETHE and ETH. The Grayscale Ethereum Trust, ETHE, was originally launched in 2017 as a private placement, meaning it was only available to select investors and institutions in the United States. Since 2019, shares of the Ethereum Trust have been traded over-the-counter (OTC) under the ticker symbol ETHE. ETHE’s OTC trading came with a 6-month holding period. However, since ETHE was converted to a spot Ethereum ETF last week, investors have gained the ability to sell their holdings more freely.
ETHE’s 2.5% management fee — which is relatively high compared to other ETF issuers’ fees of 0.25% or less — has caused investors to switch to competing products with lower fees, leading to outflows from Grayscale’s fund. This is very similar to what happened with Grayscale’s Bitcoin Trust (GBTC), which also converted to a BTC ETF in January and subsequently saw over $5 billion in outflows in its first month after the conversion.
Likely in anticipation of this momentum, Grayscale launched another ETF product this week, the Ethereum Mini Trust (ticker: ETH). The new product boasts a competitive fee of 0.15%, making it one of the most affordable spot Ethereum funds in the U.S. Unlike ETHE, Grayscale’s Mini Trust saw inflows every trading day last week, totaling $164 million.
Grayscale’s ETHE, which held about $10 billion in assets (2.9 million ETH) before its ETF conversion, has allocated $9.2 billion to its ETHE ETF product and just over $1 billion to its ETH fund.
The ETHE outflows, coupled with a more than 6% drop in Ethereum’s price since the ETF’s launch, have reduced Grayscale Ethereum Trust’s assets under management to approximately $7.46 billion (2.28 million ETH), as reported on its website. fund page.
Ethereum ETF vs Bitcoin ETF: Week One
It’s still early days, and if Grayscale’s spot Bitcoin ETF model is any indicator, ETHE net outflows could be slowing down. However, with an average net outflow of around $378 million per trading day last week, ETHE assets could be depleted within a month.
In terms of the Grayscale effect, one significant difference between GBTC and ETHE is that GBTC shares were trading at a discount to the spot price of BTC when the GBTC ETF product was launched. In contrast, ETHE’s “discount”—or the difference between the price of an ETHE share and the spot price of ETH—had closed by the time the spot Ethereum ETFs launched, which partly explains the greater incentive to exit the fund.
Additionally, the price of Bitcoin had increased significantly before the Bitcoin spot ETFs. launch In January, the price nearly doubled after approval expectations rose in October. In contrast, Ethereum’s price has been on the decline, dropping more than 15% since spot Ethereum ETFs were first approved on May 23.
“The main difference for me is the relatively massive outflow of ETHE. I think GBTC didn’t have that on day one because it was still at a significantly discounted price when it launched,” note James Seyffart, ETF analyst at Bloomberg, compares the outflows of the two products.
The nine newly launched Ethereum ETFs saw total net inflows of $106.7 million on their first day of trading on July 23, compared to $628 million in inflows for the Bitcoin ETFs when they debuted, according to data from SoSoValue
In terms of trading volume, ETH ETFs saw around $1.1 billion in transactions on their first day, while BTC ETFs saw $4.66 billion in trading volume on their inaugural day.
During the first week, Ethereum ETFs generated a total trading volume of approximately $4.05 billion, compared to $7.85 billion for Bitcoin ETFs during their initial week.
Analysts anticipate According to this estimate, Ethereum ETFs will attract flows ranging from 6% to 48% of those seen by Bitcoin ETFs in the first six months. This estimate suggests that total flows into Ethereum ETFs could reach between $1 trillion and $7.5 trillion by the end of January 2025.
At the time of writing this article, ETHthe second largest cryptocurrency, was trading at $3,280. Its market capitalization is around $393 billion, with a 24-hour trading volume of around $14.4 billion.