Ethereum ETFs Face $370M Outflows Amid Price Decline, Investor Doubts

Ethereum spot exchange-traded funds (ETFs) have experienced a prolonged period of outflows, totaling $370 million over the past 12 trading days. This marks the longest losing streak for these funds since their inception, reflecting a challenging period for Ethereum as its price has struggled to maintain momentum. The price of Ethereum has declined from around $2,200 on March 5 to approximately $1,950, according to data from a crypto data provider. This downturn has been attributed to investor doubts about Ethereum's speed and efficiency compared to its blockchain rivals, as well as a broader decline in risk-on assets due to macroeconomic concerns.

Among the funds that began trading last year, the iShares Ethereum Trust (ETHE) and the Grayscale Ethereum Trust (ETHE) have seen the most significant outflows, totaling $146 million and $106 million, respectively. This trend has coincided with a wider fall-off in crypto and other risk-on assets, as investors have become increasingly cautious about the market's direction.

In contrast, spot Bitcoin ETFs have shown signs of recovery, attracting $660 million in inflows this week. This recovery comes after a recent downturn for Bitcoin ETFs, indicating a shift in investor sentiment towards Bitcoin as a safer bet in the volatile cryptocurrency market. The recovery in Bitcoin ETFs coincides with a period of market volatility, as Bitcoin experienced a downturn from a January peak to a low on March 11. This pullback has been seen as a reset by some analysts, who believe that the market is adjusting to new conditions.

One of the key factors contributing to the lackluster performance of Ethereum ETFs is the absence of staking, which allows investors to earn additional returns by locking up their capital and participating in the validation of transactions. Robert Mitchnick, BlackRock’s head of digital assets, highlighted this issue in an interview, stating that a staking yield is a meaningful part of how investors can generate investment returns in this space. The amount of Ethereum being staked has increased to 33.8 million ETH, representing a 0.5% increase from the 33.6 million Ethereum staked on March 5, when spot Ethereum ETFs began their recent bleed.

Despite the recent outflows, Ethereum spot funds have generated $2.45 billion in net inflows since their debut last July. BlackRock’s spot Ethereum ETF has garnered $587 million, and analysts consider their launch successful, although their performance is dwarfed by spot Bitcoin ETFs that have received more than $35 billion in net inflows. This highlights a growing institutional risk appetite for Bitcoin, while Ethereum’s recovery remains sluggish as investors wait for stronger catalysts.

The diverging trends between Bitcoin and Ethereum ETFs suggest that investors are increasingly favoring Bitcoin as a safer bet in the volatile cryptocurrency market. The recovery in Bitcoin ETFs, coupled with the sustained outflows from Ethereum Spot ETFs, indicates a shift in investor sentiment that could have long-term implications for the cryptocurrency market. The performance of Ethereum against Bitcoin has been at its lowest point in five years, further highlighting the challenges faced by Ethereum in the current market environment.