Unlocking of Grayscale Impacts Ethereum ETFs, Yet Inflows Signal Promising Outlook

The debut of US-traded spot Ethereum (ETH) exchange-traded funds (ETFs) faced a challenging start, with $476 million in negative net flows observed in the first month of trading. This struggle was attributed to the overshadowing outflows from Grayscale’s ETHE unlock. In contrast, the Newborn Nine spot Bitcoin (BTC) ETFs, hailed by Bloomberg senior ETF analyst Eric Balchunas for their “heroic” performance, managed to attract significant inflows, surpassing the outflows experienced by GBTC.

The disparity in performance between Bitcoin and Ethereum ETFs was notable, with Bitcoin ETFs attracting $5 billion in inflows during a similar timeframe post-launch. Analysts pointed to factors such as Bitcoin’s “first mover advantage,” the absence of staking options in Ethereum ETFs, and lower liquidity in the Ethereum market as reasons for the underwhelming performance of Ethereum ETFs among institutional investors.

Despite the initial challenges, some Ethereum ETFs showed signs of recovery towards the end of the month. Balchunas expressed optimism, stating that the outflows were not expected to persist indefinitely, and the newly launched ETFs’ inflows were projected to catch up to the outflows. He emphasized that there was a positive outlook for the future, stating, “But good news is unlock will end, there’s light at end of tunnel.”

Grayscale’s ETHE experienced significant outflows of nearly $2.6 billion in its first month, a trend also observed with its Bitcoin trust, GBTC. While other Ether ETFs did not achieve positive monthly net flows, the total cash inflows into these crypto products remained substantial.

Among the notable performers, BlackRock’s ETHA saw inflows exceeding $1 billion, positioning it as the seventh-largest ETF by year-to-date flows. Fidelity’s FETH also attracted significant flows of approximately $393 million, ranking it as the 19th largest ETF by year-to-date flows. Bitwise’s ETHW, the third and final US-traded Ethereum ETF, managed to secure over $300 million in inflows during its initial year.

Despite the challenges faced by Grayscale’s ETHE, its Ethereum mini trust, ETH, attracted nearly $240 million in inflows. When considering the total inflows of US-traded Ethereum ETFs as a collective product, it would rank as the fourth-largest exchange-traded fund by 2024’s flows.