Ethereum ETF's first week online: Grayscale ETHE net outflow reached $1.5 billion

24-07-31 13:42

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Original title: The spot Ethereum ETFs' first week by the numbers
Original author: James Hunt, The Block

Original translation: Eason, MarsBit

Last week, the newly launched Ethereum spot ETFs in the United States had a good start, with 8 funds having net inflows of more than $1 billion, while Grayscale's ETHE had a net outflow of up to $1.5 billion.

Except for ETHE, the net inflows generated by Ethereum ETFs accounted for about 40% of the net inflows generated by Bitcoin ETFs after their launch in January (excluding GBTC).

Last week saw a contrasting start for U.S. spot Ethereum exchange-traded funds (ETFs), with net inflows for most ETFs being overwhelmed by net outflows from Grayscale’s switch fund, ETHE.

Last Tuesday, eight issuers launched a total of nine new Ethereum spot ETFs, which were approved by the U.S. Securities and Exchange Commission in May.

Four days after the opening, BlackRock's ETHA led the way with a net inflow of $442 million; Bitwise's ETHW had a net inflow of $265.9 million; Fidelity's FETH had a net inflow of $219.4 million; VanEck's ETHV, Franklin Templeton's EZET, Invesco's QETH, and 21 Shares' CETH also had net inflows of $35.4 million, $23.3 million, $14.2 million, and $7.5 million, respectively.

In fact, almost all ETFs have generated inflows, with the exception of Grayscale's ETHE, which saw a net outflow of more than $1.5 billion last week alone, bringing the total net outflow of U.S. spot Ethereum ETFs to $341.8 million.

In comparison, the total net inflow of US spot Bitcoin in the first four days was $1.26 billion, and the ETF launched in January. However, excluding ETHE, the net inflow of Ethereum ETFs was about 40% of the net inflow of Bitcoin ETFs after their launch in January (excluding GBTC, which was also converted), at $1.17 billion, while the Bitcoin ETF was $2.89 billion.

“Over $1 billion flowed into spot Ethereum ETFs this week, excluding ETHE. Some of that was obviously recycled from ETHE, but nowhere near the primary driver, in my opinion,” ETF Store President Nate Geraci said Friday. “It was a very successful debut. Another way to think about it is that investors wanted to get $1 billion+ of ether exposure through traditional financial channels. In 4 days,” he added.

Over the same four days last week, spot Bitcoin ETFs saw net inflows totaling $49.4 million, with BlackRock’s IBIT seeing the highest inflows at $231.8 million, though BRRR data for Valkyrie’s Friday trade was not available as of this writing. Bitcoin ETF data fell sharply after the Ethereum ETF launched, with net inflows of $485.9 million last Monday.

The Huge Influence of Grayscale ETHE

Grayscale Ethereum Trust was first launched in 2017 as a private placement. In mid-2019, its shares began to trade publicly on the OTC market under the ticker symbol ETHE. This continued until July 23, when ETHE was upgraded to NYSE Arca as one of the newly approved spot Ethereum ETFs.

ETHE also has much higher fees at 2.5%, while other issuers' spot Ethereum ETFs have waived fees of 0.19% to 0.25%. However, in the incumbent Grayscale's two-pronged strategy, its additional Grayscale Mini Trust Ethereum ETF product (ETH) charges the lowest fees at just 0.15%.

Before the switch, Grayscale Ethereum Trust held about $10 billion worth of assets (2.9 million ETH), with $9.2 billion worth of seed funding allocated to ETHE and its ETH fund receiving just over $1 billion.

Grayscale’s ETH Mini Trust also saw net inflows last week, totaling $164 million. However, the large outflows from ETHE, combined with the drop in ether’s price since the ETF launched, have caused its assets under management to drop to about $7.5 billion (2.28 million ETH), according to its fund page.

Of course, it’s still early, and if Grayscale’s converted spot Bitcoin ETF GBTC is anything to go by, net outflows could slow. However, at current average net outflows of about $378 million per trading day, ETHE’s assets could be depleted in a matter of weeks.

“The main difference to me is that ETHE had relatively large outflows. I don’t think that happened with GBTC on day one because it was still at a significant discount when it launched,” said James Seyffart, an ETF analyst at Bloomberg, comparing outflows from the two products.

“The ‘new eight’ Ethereum ETFs are not as strong as the ‘new nine’ Bitcoin ETFs in offsetting Grayscale outflows, but the good news is that their inflows/volumes are still very healthy, and the strength of ETHE unlocking will weaken faster than GBTC = good prospects, but the next few days may be difficult,” added Eric Balchunas, ETF analyst at Bloomberg.

Ethereum ETF trading volume compared to Bitcoin ETF trading volume

The spot Ethereum ETF had a cumulative trading volume of $4.05 billion in the first week, accounting for 34% of the $11.82 billion trading volume of the spot Bitcoin ETF in the four days after its launch.

Spot Ethereum ETF trading volume is dominated by Grayscale's ETHE, with a market share of about 52% on Friday, followed by BlackRock's ETHA, Grayscale's ETH, and Fidelity's FETH, with trading volume shares of 21.7%, 12%, and 8.4%, respectively.

Although Bitcoin ETF trading volume is currently at a low level since its launch, Ethereum ETF accounted for 55% of Bitcoin ETF trading volume ($7.35 billion) in the same period last week.

Again, it is still early days and Ethereum ETFs may also experience a slowdown after their initial launch. However, inflows and trading volume excluding ETHE and GBTC account for a higher proportion of Bitcoin ETF data than most analysts expected, which is 15-25%.

According to The Block's data dashboard, the trading volume of the spot Ethereum ETF has also quickly surpassed that of existing Ethereum futures ETF products, accounting for 99.3% of the market share as of Friday.

In contrast, spot Bitcoin ETFs account for about 92.75% of the trading volume market share compared to Bitcoin futures ETFs.

Global Situation Slump

The latest report from asset management company CoinShares shows that the global situation is even more sluggish at the time of the launch of the US spot Ethereum ETF, with global net inflows of only $245 million for digital asset investment products.

Global Bitcoin investment products had a net inflow of $519 million last week, and inflows reached $3.9 billion in July. "We believe that U.S. campaign rhetoric about Bitcoin as a potential strategic reserve asset and the increased likelihood of a September 2024 rate cut by the Federal Reserve may be responsible for renewed investor confidence," wrote James Butterfill, head of research at CoinShares.

Butterfill added that trading volumes also rose to their highest level since May last week, reaching $14.8 billion, driven by the launch of a new U.S. Ethereum spot ETF.

"The launch of the U.S. spot Ethereum ETF brought in the largest inflows since December 2020, with $2.2 billion in inflows into newly issued ETFs, while ETH ETP volume increased 542%," Butterfill said. However, this figure includes about $1 billion in seed funding for the Grayscale Mini Trust ETF (ETH), plus a $1.5 billion net outflow from Grayscale's converted ETHE product, for a total of $285 million in net outflows from global Ethereum investment products last week.

Butterfield noted that crypto investment products now have $99.1 billion in total assets under management worldwide, with net inflows hitting a record $20.5 billion so far this year.

According to The Block's Ethereum price page, Ether is currently trading at $3,389, up 4.3% in the past 24 hours, but down 3% in the past week.