The U.S. Spot Ethereum ETFs

The U.S. spot Ethereum (ETH) exchange-traded funds have seen a mixed start this week, with certain ETFs experiencing net inflows, while Grayscale’s converted fund, ETHE, faces significant net outflows.

New Ethereum ETFs Launch

On Tuesday, nine new spot Ethereum ETFs from eight issuers launched after receiving approval from the Securities and Exchange Commission in May. In their initial trading days, BlackRock’s ETHA leads with $354.8 million in net inflows, followed by Bitwise’s ETHW with $249.9 million and Fidelity’s FETH with $180.1 million. Most ETFs have reported inflows, with Grayscale’s ETHE facing a notable $1.16 billion net outflow in just three days.

Grayscale Ethereum Trust initially launched as a private placement in 2017, and its shares began publicly trading on OTC Markets in mid-2019. The fund was uplisted to NYSE Arca as a newly-approved spot Ethereum ETF on July 23. ETHE has a higher fee structure, charging 2.5%, compared to the 0.19% to 0.25% fees of other ETFs. However, Grayscale’s Mini Trust Ethereum ETF product (ETH) offers a lower fee of 0.15%.

From approximately $10 billion in assets (2.9 million ether) prior to conversion, $9.2 billion was allocated to ETHE, and over $1 billion went to ETH. Grayscale’s ETH saw net inflows totaling $119.1 million over the past three days, but ETHE’s net outflows and a drop in ether’s price have reduced its assets under management to around $7.5 billion (2.4 million ether).

Future Outlook for ETHE

Initially, it’s early days, but if Grayscale’s spot Bitcoin ETF, GBTC, serves as a reference, the net outflows for ETHE may slow. However, with a current average net outflow of roughly $385 million per day, ETHE’s assets may be depleted in under a month.

Comparing Bitcoin and Ether ETF Outflows

The patterns of net outflows from GBTC have evolved more gradually compared to ETHE. A notable distinction is that GBTC launched while trading at a discount to net asset value, whereas ETHE’s discount had already been closed pre-launch. Bitcoin’s price surged prior to its ETF launch in January, while ether has recently declined more than 15% since the approval of its ETFs on May 23.

Rachel Lin, CEO of SynFutures, described the Ethereum ETF launch as a classic “sell the news” event, with ether retracting over 10% from its peak. She remarked that Grayscale’s ETHE fund is becoming a net seller, countered by insufficient buying pressure from other ETFs, contributing to ether’s underperformance.

Assessment of Future Selling Pressure

Analyzing Grayscale’s Bitcoin ETF selling trends could provide insights into potential future movements, as GBTC lost 50% of its assets initially but has stabilized. Currently, ETHE has seen a greater percentage of its assets reallocated, suggesting heightened risk for ether’s price. On-chain data from custodians for ether may offer leading indicators regarding ETHE’s continued selling pressure.

Broader Market Impacts

Moreover, the general correction in the stock market, particularly in the Nasdaq, may further impact the crypto space, as Lin noted that if equity markets continue to decline, crypto might also be affected in the near term.