US Ethereum ETFs Face Challenges: $1.5B Exits Grayscale Fund, BlackRock Leads Initial Inflows

Newly launched US spot Ethereum exchange-traded funds (ETFs) faced a challenging start with investors withdrawing approximately $1.5 billion from Grayscale’s fund following the first week of trading, according to data from Farside Investors. These ETFs closed the week with nearly $342 million in net outflows, while BlackRock’s Ethereum Trust saw the highest inflows during the initial week, attracting $442 million.

The $9.1 billion Grayscale Ethereum Trust (ETHE) recorded over $450 million in trading volume on Tuesday, representing almost half of the total trading activity. Subsequently, investors pulled out over $480 million from the fund on its first day of trading as an ETF, as per Farside’s data.

Despite this, other ETFs witnessed $590 million in inflows, primarily driven by BlackRock’s iShares Ethereum Trust (ETHA), resulting in total first-day inflows of nearly $107 million across all US spot Ethereum ETFs. However, Ethereum ETF flows took a sharp turn after a strong debut, with outflows of $133 million on Wednesday, followed by additional losses of $152 million and $162 million on Thursday and Friday, respectively.

Grayscale’s ETHE has experienced net outflows of about $1.5 billion since its conversion, while newly launched spot Ethereum ETFs have garnered investor interest. BlackRock’s ETHA led with $442 million in inflows, followed by Bitwise’s ETHW at $265 million and Fidelity’s FETH at $219 million.

Conversely, Grayscale’s Ethereum Mini Trust (ETH), a spinoff of the trust, has seen a steady increase in net inflows, attracting around $164 million since its launch. Investors seem to be shifting assets from ETHE to lower-cost alternatives, with the Mini Trust emerging as an appealing option.

Other Ethereum funds that reported inflows included VanEck’s ETHV, Franklin Templeton’s EZET, Invesco/Galaxy’s QETH, and 21Shares’ CETH. As the Ethereum ETF market enters its second week, Grayscale’s ETHE is anticipated to continue experiencing outflows.

According to Bloomberg ETF analyst Eric Balchunas, although the new Ethereum ETFs are drawing inflows and volume, they are currently less effective in offsetting the significant outflows from Grayscale’s ETHE compared to the impact of Bitcoin ETFs on Grayscale’s Bitcoin Trust (GBTC).

Ethereum’s market capitalization appears less responsive to new investment inflows compared to Bitcoin, as indicated by a report from CryptoQuant. The spot trading volume of Ethereum on centralized exchanges is notably lower than that of Bitcoin, signaling lower market activity.

Additionally, the recent Dencun upgrade has resulted in an increase in Ethereum’s supply, diminishing its deflationary characteristics and affecting its “ultrasound money” narrative, potentially impacting its price performance. Following the debut of the spot Ethereum ETF, ETH saw a decrease of over 10%, reaching a low of $3,100. Currently, ETH is trading around $3,300, marking a more than 4% increase in the last 24 hours.