The launch of spot Ethereum exchange-traded funds (ETFs) has not met the high expectations set by their Bitcoin counterparts, leading industry experts to analyze the underlying reasons. Since their inception on July 23, all spot ETH ETFs have seen outflows of $463 million, according to Farside Investors data. The main culprit is Grayscale’s ETHE with $2.996 billion in outflows, while BlackRock has $1.258 billion and Bitwise $321 million in inflows.
Why Are Spot Ethereum ETFs Not Doing Better?
Hunter Horsley, CEO of Bitwise Asset Management, took to X to shed light on the factors affecting the performance of the US spot Ether ETFs. “Why didn’t the Ethereum ETFs do better? A question I got at an event last week,” Horsley began. “First, how do you judge success? The ETPs from iShares, Fidelity, and Bitwise are all in the top 25 fastest growing new ETPs this year,” he added.
Despite their position among the fastest-growing exchange-traded products (ETPs), Horsley identified several factors that worked against the successful launch of spot Ethereum ETFs. He noted that the timing of the launch during summer, a typically slow period for investors who “monitor but don’t take on a lot of new projects,” may have dampened immediate interest.
Additionally, the market conditions played a role: “Bull markets always draw focus. Bitcoin ETPs launched amid a rising Bitcoin. Ether ETPs launched in a sideways market.” The lack of bullish momentum in Ethereum’s price may have contributed to the tepid response.
Furthermore, the sequential launch of Ethereum ETFs following Bitcoin ETFs may have overwhelmed investors still acclimating to cryptocurrency assets. “For many traditional investors, some time has been and continues to be needed to figure out how to incorporate Bitcoin after the launch of the ETPs. Ethereum arriving before that was solved made it hard to turn attention to it,” Horsley explained.
Nate Geraci, President of The ETF Store and co-founder of the ETF Institute, highlighted the broader success of crypto-related ETFs in 2024. “Update… Out of 525 ETFs launched in 2024, 13 of top 25 are either bitcoin or ether-related. 14 if you include MSTR Option Strategy ETF. Top 4 ETFs all spot btc. 5 of top 7 crypto-related. I call this masterpiece ‘no demand’.”
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In response, Christopher Perkins, President of CoinFund, suggested that yield-generating products could enhance appeal. “Yield would help. Total return ETH is the killer product,” he stated. Horsley acknowledged the value of staking but downplayed its immediate impact on ETF performance. “Agree, ET32 has been growing rapidly in our Europe franchise,” he replied.
However, Horsley also added, “I don’t think lack of staking yield is a huge issue. Most of ETH today is owned directly so could be staked, yet ~2/3 don’t. But agree it’s valuable. We have an ETH ETP with staking in Europe that’s growing nicely.”
Industry veteran Dan Tapiero, founder and CEO of 10T Holdings, remained optimistic about the future of spot Ethereum ETFs. “Just wait. They’re gonna do just fine,” he asserted. Horsley concurred, simply stating, “Agree.”
At press time, ETH traded at $2,705.
Featured image created with DALL.E, chart from TradingView.com
