Ethereum ETFs see $341.8m net outflows in first week, triggered by Grayscale’s ETHE

U.S. spot Ethereum exchange-traded funds are off to a mixed start this week, with net inflows into most ETFs overshadowed by significant net outflows from Grayscale’s converted fund ETHE.

Data from Farside Investors shows that spot Ethereum (ETH) ETFs saw outflows totaling just over $162 million on Friday, July 26, marking the third consecutive day of net negative flows. In contrast, spot Bitcoin (BTC) ETFs saw net inflows of $51.8 million on the same day, continuing a three-day trend of positive flows.

The first spot Ethereum ETFs in the United States (nine products from eight issuers) began trading on Tuesday, July 23, following approval by the Securities and Exchange Commission in May.

First week of ETH ETFs

In the first week of trading, most newly launched Ethereum ETFs saw positive inflows, but Grayscale’s ETHE saw net outflows of $1.51 billion. ETHE’s outflows resulted in an overall weekly outflow of $341.8 million for the ETF.

In terms of inflows, BlackRock’s ETHA led the way with $442 million in net inflows, followed by Bitwise’s ETHW with $265.9 million and Fidelity’s FETH with $219.4 million.

VanEck’s ETHV and Franklin Templeton’s EZET saw smaller inflows of $35.4 million and $23.3 million respectively. 21Shares’ CETH saw inflows of $7.5 million on its launch day alone and zero inflows over the next three trading days.

Ethereum ETF sees flow in first week of trading | Source: Farside Grayscale announces two Ethereum ETFs

Last week, major crypto asset manager Grayscale introduced two spot Ethereum funds trading under the symbols ETHE and ETH. The Grayscale Ethereum Trust, ETHE, was initially launched in 2017 as a private placement, meaning it was only available to select investors and institutions in the U.S. Since 2019, Ethereum Trust shares have been publicly traded OTC under the symbol ETHE. ETHE’s OTC trading came with a 6-month holding period. However, since ETHE was converted to a spot Ethereum ETF last week, investors have been able to sell their holdings more freely.

The 2.5% management fee for ETHE — quite high compared to the 0.25% or less fees of other ETF issuers — has led investors to switch to rival products with lower fees and encouraged outflows from Grayscale’s fund. That’s very similar to what happened with Grayscale’s Bitcoin Trust (GBTC), which converted to a BTC ETF in January and then saw over $5 billion in outflows in its first month after the conversion.

Perhaps anticipating this dynamic, Grayscale this week launched another ETF product, the Ethereum Mini Trust (ticker ETH). The new product has a competitive fee of 0.15%, making it one of the most affordable spot Ethereum funds in the U.S. Unlike ETHE, Grayscale’s Mini Trust saw a total of $164 million in inflows each trading day last week.

Grayscale’s ETHE, which held approximately $10 billion in assets (2.9 million ETH) before being converted to an ETF, has allocated $9.2 billion to its ETHE ETF product and just over $1 billion to its ETH fund.

The ETHE outflows and the more than 6% drop in the Ethereum price since the ETFs were launched have reduced Grayscale Ethereum Trust’s assets under management to approximately $7.46 billion (2.28 million ETH), according to the company’s fund page.

Ethereum ETFs vs Bitcoin ETFs: first week

It’s still early days, and if Grayscale’s spot Bitcoin ETF model is any indication, net outflows for ETHE could slow. However, with average net outflows of around $378 million per trading day last week, ETHE could run out of assets within a month.

In terms of the Grayscale effect, a key difference between GBTC and ETHE is that when the GBTC ETF product launched, GBTC shares were trading at a discount to the spot BTC price. In contrast, ETHE’s “discount” — or the difference between the price of an ETHE share and the spot price of ETH — had closed when the spot Ethereum ETFs launched, partly explaining the stronger incentive to exit the fund.

Additionally, Bitcoin’s price had risen significantly in January prior to the launch of spot Bitcoin ETFs, and nearly doubled in October as approval expectations rose. In contrast, Ethereum’s price has been on the decline, falling more than 15% since spot Ethereum ETFs were first approved on May 23.

“The biggest difference for me is the relatively large ETHE outflow. I don’t think GBTC had that on day one because it was still at a meaningful discount when it launched,” Bloomberg ETF analyst James Seyffart said when comparing the outflows of the two products.

According to data from SoSoValue, nine newly launched Ethereum ETFs saw a total of $106.7 million in net inflows on their first day of trading on July 23, while first-day inflows for Bitcoin ETFs were $628 million.

In terms of trading volume, ETH ETFs saw around $1.1 billion in trading volume on their first day, while BTC ETFs saw $4.66 billion in trading volume on their first day.

During the first week, Ethereum ETFs generated approximately $4.05 billion in total trading volume, while Bitcoin ETFs generated $7.85 billion in trading volume in their first week.

Analysts predict that spot Ethereum ETFs will attract inflows ranging from 6% to 48% of what Bitcoin ETFs saw in the first six months. This estimate suggests that total inflows into Ethereum ETFs could reach between $1 trillion and $7.5 trillion by the end of January 2025.

At press time, ETH, the second-largest cryptocurrency, was trading at $3,280, with a market cap of around $393 billion and a 24-hour trading volume of close to $14.4 billion.