The introduction of spot Ethereum exchange-traded funds (ETFs) has not lived up to the lofty expectations set by Bitcoin ETFs, prompting industry analysts to examine the factors at play. Since their launch on July 23, spot ETH ETFs have experienced outflows totaling $463 million, as reported by Farside Investors. Grayscale’s ETHE accounts for the majority of these outflows, with $2.996 billion, while BlackRock has seen inflows of $1.258 billion and Bitwise has gained $321 million.
What Is Holding Back Spot Ethereum ETFs?
Hunter Horsley, CEO of Bitwise Asset Management, addressed the elements impacting the performance of US spot Ether ETFs on X. “Why didn’t the Ethereum ETFs perform better? This was a question I encountered at a recent event,” said Horsley. “Firstly, how do you define success? The ETPs from iShares, Fidelity, and Bitwise are all among the top 25 fastest-growing new ETPs this year,” he continued.
Even though these ETFs rank among the top-growing exchange-traded products (ETPs), Horsley pointed out various challenges faced during their launch. He mentioned that launching during the summer, typically a sluggish time for investors who are cautious and avoid taking on new ventures, may have led to a lower initial interest.
Moreover, market conditions influenced the situation: “Bullish markets always capture attention. Bitcoin ETPs debuted during a rising Bitcoin market. Ether ETPs launched in a stagnant market.” The absence of bullish momentum in Ethereum’s price could have affected investor enthusiasm.
Additionally, the staggered launch of Ethereum ETFs right after Bitcoin ETFs might have overwhelmed investors who were still adjusting to cryptocurrency assets. “For many traditional investors, time is still needed to understand how to incorporate Bitcoin following the launch of its ETPs. The arrival of Ethereum before this understanding was achieved made it difficult to focus on it,” Horsley elaborated.
Nate Geraci, President of The ETF Store and co-founder of the ETF Institute, emphasized the overall success of crypto-related ETFs in 2024. “Update… Of the 525 ETFs launched in 2024, 13 of the top 25 are either bitcoin or ether-related. 14 if we include the MSTR Option Strategy ETF. The top 4 ETFs are all spot bitcoin. 5 of the top 7 are crypto-related. I refer to this phenomenon as a ‘masterpiece of no demand’.”
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In response, Christopher Perkins, President of CoinFund, proposed that yield-generating products could boost attractiveness. “Yield would enhance appeal. A total return ETH is the ultimate product,” he asserted. Horsley acknowledged the significance of staking but moderated its immediate effect on ETF performance. “I agree, ET32 has been expanding rapidly in our European market,” he replied.
However, Horsley also mentioned, “I don’t believe the absence of staking yield is a significant concern. Most of the ETH today is held directly and could be staked, yet around two-thirds are not. But I agree it’s important. We offer an ETH ETP with staking in Europe that’s experiencing nice growth.”
Industry veteran Dan Tapiero, founder and CEO of 10T Holdings, remained hopeful about the prospects for spot Ethereum ETFs. “Just wait. They will perform just fine,” he stated confidently. Horsley added his agreement, simply saying, “I concur.”
At the time of writing, ETH was trading at $2,705.
Featured image created with DALL.E, chart from TradingView.com
