"ETH ETFs Surge: Institutions Chase Higher Yields in Basis Trade"

Ethereum ETF inflows surpassed those of Bitcoin ETFs in the first week of February, with ETH ETFs recording $420M in inflows compared to $173M for BTC ETFs, according to data tracked by SoSo Value and Farside Investors.

Analysts attributed this trend to large players taking advantage of the discounted window offered by the ETH de-leveraging event earlier in the week. However, Coinbase analysts David Han and David Duong clarified that the outperformance in ETH ETF flows was primarily driven by institutional players eyeing ETH 'basis trade.'

CME Ethereum basis trade refers to an arbitrage play where institutional players buy ETH in the Spot market and short it on the Futures side, pocketing the difference (yield or basis). This is common for both ETH and BTC. However, analysts Han and Duong noted that CME ETH basis trade had a higher yield than BTC this week, suggesting that most large players jumped on ETH by buying Spot ETH ETF and shorting the CME Futures.

As per the attached chart, the CME ETH yield surged as high as 16% while the CME BTC basis fluctuated around 10%. Simply put, ETH trade offered more risk-reward opportunities than BTC over the last seven trading days.

Another indicator that supported the aforementioned thesis was greater inflows into ETH Futures, compared to BTC, since the U.S elections in November 2024. The analysts added that ETH Futures’ Open Interest rates (OI) surged from 354K ETH to 1.13M ETH as of early February 2025. On the other hand, CME BTC Futures recorded stagnant inflows over the same period.

That being said, the analysts also noted that ETH’s price could remain muted in the short term amid negative funding rates and strong competition from Solana.