ETH ETFs See Largest Outflows Since July

Ether (ETFs) saw their largest net outflows since July as institutional demand for the world’s second-largest cryptocurrency wanes.

Ether (ETH) exchange-traded funds (ETFs) saw their largest net outflows since July, with over $79 million withdrawn on Monday, signaling a decline in institutional demand for the world’s second-largest cryptocurrency.

 The outflow was primarily driven by Grayscale’s spot ether ETF (ETHE), which experienced a staggering $80.6 million in withdrawals—the largest single-day outflow since spot ether ETFs were launched earlier this year.

Source: Farside Investors

The withdrawals, which exceeded the combined outflows of the previous nine days, are likely a result of profit-taking as Ether’s price surged nearly 20% in the past 10 days, reaching a peak of $2,700 before settling at $2,600. In contrast, other ether ETFs saw minimal movement, with the exception of Bitwise’s ETHW, which recorded $1.3 million in outflows.

Despite a broader crypto market rally fueled by last week’s Federal Reserve interest rate cuts, which helped lift ether prices by 11% over the past week, total net outflows for all spot ETH ETFs reached $79.3 million on Monday. This divergence between ether’s price momentum and ETF flows indicates investor uncertainty about the asset’s long-term growth prospects.

Grayscale’s ETHE has seen cumulative outflows of $2.84 billion since its July launch, contributing significantly to the total net outflows of $686.9 million from all spot ether ETFs. While inflows into other funds, such as BlackRock’s ETHA, have mitigated some losses, they have not been enough to offset the massive outflows from ETHE.

It appears that traditional finance investors remain cautious about ETH, with ETH’s investment thesis less obvious than BTC. This hesitancy is reflected in market performance; while bitcoin reached fresh highs in March before a 20% drop, ETH has yet to break its 2021 peak and is still trading at about half that level. Year-to-date, Bitcoin has returned over 50%, while ETH has gained just under 15%.

Spot ether ETFs have also struggled to match the success of their bitcoin counterparts. The total market cap for spot ether ETFs stands at $5.87 billion, far below the $74.90 billion market cap for bitcoin ETFs. Ethereum’s inability to push compelling narratives to attract more inflows has been a frequent point of criticism, although the upcoming Pectra upgrade in February 2025, which will allow users to pay gas fees with altcoins, is seen as a potential catalyst for future growth.

Some market analysts believe that political developments could provide a short-term boost for ether. Travis Kling, CIO of Ikigai Asset Management, suggested on a recent episode of the Unchained podcast that a victory for Donald Trump in the 2024 U.S. presidential election could lead to a more crypto-friendly SEC and provide regulatory clarity for ether. “If Trump wins, my base case is that ETH will go up significantly in the immediate aftermath,” Kling said. He noted that an ETH spot ETF offers traditional investors an accessible entry point into the market, potentially increasing demand under favorable political conditions.

Despite the challenges, the upcoming developments in Ethereum’s ecosystem and the potential for political shifts leave room for optimism among some investors, even as short-term ETF outflows suggest caution among others.