The introduction of Spot Ethereum exchange-traded funds (ETFs) did not meet the high expectations set by their Bitcoin counterparts, leading industry experts to analyze the underlying reasons. Since their launch on July 23, all ETH ETHs have seen $463 million in outflows, according to data from Farside Investors. The main case 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 Underperforming?
Hunter Horsley, CEO of Bitwise Asset Management, took to X to reveal the factors affecting the performance of the US Ether spot. “Why hasn’t the Ethereum ETF done better? “A question I got at the event last week,” Horsley began. “First of all, how do you look at success? ETPs from iShares, Fidelity, and Bitwise are all among the 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 Ethereum ETFs. He noted that the timing of the launch in the summer, a slow period for investors “who are cautious but don’t take on many new projects,” may have dampened the immediate interest.
Additionally, market conditions play a role: “Bull markets always attract attention. Bitcoin ETPs were launched amid the Bitcoin boom. Ether ETP is introduced to the side market.” The lack of bullish momentum in the price of Ethereum may have contributed to the hot reaction.
In addition, the sequential launch of Ethereum ETFs following Bitcoin ETFs is likely to boost investors who are still familiar with cryptocurrency assets. “For many traditional investors, it has been and continues to be necessary to find a way to invest in Bitcoin after the introduction of ETPs. The arrival of Ethereum before that was resolved made it difficult to get attention,” explained Horsley.
Nate Geraci, President of the ETF Store and founder of the ETF Institute, highlighted the broad success of crypto-related ETFs in 2024. “Review… Of the 525 ETFs launched in 2024, 13 of the top 25 are either bitcoin or ether- related. 14 if you include the MSTR Option Strategy ETF. Top 4 ETFs are all btc. 5 of the top 7 are crypto related. I call this work of art ‘no need’.”
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In response, Christopher Perkins, President of CoinFund, suggested that yield-producing products could improve attractiveness. “The harvest will help. Total return ETH is a killer product,” he said. Horsley acknowledged the importance of staking but downplayed its immediate impact on ETF performance. “I agree, ET32 has been growing rapidly in our European business,” he replied.
However, Horsley added, “I don’t think the lack of yield is a big deal. Most of the ETH today is owned directly and therefore can be staked, however ~2/3 are not. But admit it is precious. We have a growing ETH ETP in Europe that is growing well. “
Industry veteran Dan Tapiero, founder and CEO of 10T Holdings, remains optimistic about the future of Ethereum ETFs. “Wait. They’ll do fine,” he asserted. Horsley agreed, simply saying, “Agree.”
At press time, ETH traded at $2,705.
The featured image was created with DALL.E, a chart from TradingView.com