Bitcoin ETFs Surge on Institutional Demand as Ethereum Stumbles in Regulatory Crosshairs

Bitcoin ETFs closed the week with robust inflows, driven by sustained institutional demand and a narrowing Kimchi Premium in South Korea, while Ethereum ETFs faced broad outflows amid regulatory uncertainty and macroeconomic headwinds. According to data from CryptoQuant and exchange filings, Bitcoin ETFs saw record-setting flows in Q3 2025, with inflows exceeding $3.2 billion week-on-week. This momentum was supported by a 0.13% Kimchi Premium on South Korean exchanges like Upbit, reflecting improved liquidity and reduced arbitrage barriers compared to earlier in the year .

Ethereum, however, experienced a divergent trend. Ether ETFs reported net outflows of $480 million in the same period, attributed to weaker retail sentiment and capital controls limiting arbitrage opportunities. On-chain analytics indicate a 22% decline in KRW deposits to South Korean exchanges in July, signaling cautious investor behavior . The Kimchi Premium for Ethereum also narrowed to 0.11%, contrasting with Bitcoin’s resilience. Analysts attribute this disparity to Ethereum’s reliance on institutional adoption and its exposure to regulatory scrutiny, particularly in South Korea’s tightening crypto framework .

The week’s performance highlighted structural differences between the two assets. Bitcoin’s price on global exchanges, such as Binance, remained 0.61% higher than South Korean prices in early September, a modest gap compared to the 3-5% premiums observed in late 2024 . This narrowing was linked to increased arbitrage activity and a shift in South Korean investor preferences toward equities and traditional ETFs. Meanwhile, Ethereum’s price on Upbit traded at a 0.57% discount to Binance in September, underscoring persistent inefficiencies in local markets .

Institutional activity further amplified Bitcoin’s strength. Bitwise CIO Matt Hougan noted that reduced supply post-April 2024 halving, combined with corporate and governmental buying, created a “perfect storm” for Bitcoin’s bull run. By Q2 2025, Bitcoin could reach $200,000 if current demand trends persist . Ethereum, however, faces headwinds from its own supply dynamics. With Ethereum ETFs underperforming Bitcoin counterparts, analysts at Standard Chartered caution that the asset’s valuation may lag unless upgrades like Pectra (targeting sub-five-second finality) accelerate adoption .

Geopolitical and macroeconomic factors added complexity. South Korea’s political instability, including the impeachment of acting President Han Duck-soo, spurred inflows into Bitcoin as a perceived safe-haven asset. Conversely, Ethereum’s exposure to U.S. interest rate policies and regulatory ambiguity—particularly around staking—limited its appeal to risk-averse investors . The Federal Reserve’s signal of fewer 2025 rate cuts tempered enthusiasm, though pro-crypto policy shifts in the U.S. and Europe provided partial offsets .

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