Initial Challenges for US-Traded Ethereum ETFs in First Month
The launch of US-traded spot Ethereum (ETH) exchange-traded funds (ETFs) encountered a tough beginning, with a negative net flow of $476 million recorded during the inaugural month of trading. This performance fell short of the achievements seen by the Newborn Nine spot Bitcoin (BTC) ETFs, which attracted notable inflows despite Grayscale’s ETHE unlock causing outflows.
According to Eric Balchunas, a senior ETF analyst at Bloomberg, obstacles faced by Ethereum ETFs included Ethereum lacking a “first mover advantage,” limited staking options, and lower liquidity, all of which acted as deterrents for institutional investors. Despite these challenges, there are signs of improvement as certain Ethereum ETFs demonstrated progress towards the end of the month.
Balchunas remains hopeful, affirming that the current outflows are temporary and that inflows will eventually pick up. He expressed optimism by stating, “But the good news is the unlock will end, and there’s light at the end of the tunnel.”
During its first month, Grayscale’s ETHE saw outflows of close to $2.6 billion, a trend resembling their Bitcoin counterpart GBTC. Despite the negative net flows, other Ethereum ETFs like BlackRock’s ETHA, Fidelity’s FETH, and Bitwise’s ETHW attracted substantial inflows, establishing themselves as key players in the ETF market.
Even with Grayscale’s ETHE facing significant outflows, their Ethereum mini trust, ETH, managed to attract nearly $240 million in inflows. If all US-traded Ethereum ETF inflows are amalgamated into a single product, it would rank as the fourth-largest exchange-traded fund based on 2024’s expected flows.
While the challenges encountered by US-traded Ethereum ETFs in their initial month are notable, there is room for optimism regarding future growth as the market matures and investor confidence grows, marking a pivotal milestone in the cryptocurrency ETF arena.
