Institutional Money Flees Ethereum, Flocks to Bitcoin as a Safe Haven

Yesterday, the Fidelity Bitcoin ETF (FBTC) experienced a net outflow of $55.8 million, while the Fidelity Ethereum ETF (FETH) saw no net inflow or outflow. This marked a sharp contrast to the broader Ethereum ETF market, which continued to face a wave of net outflows. Over the previous six days, Ethereum ETFs saw a cumulative outflow of $96.7 million, with BlackRock’s ETHA recording the largest single-day outflow of $193 million on September 8. Meanwhile, FETH saw a net inflow of $75.2 million, bringing its total historical inflow to $2.55 billion, and Grayscale’s ETH ETF added $11.3 million in inflows during the same period.

The Ethereum ETF outflows reflect a broader shift in institutional investor sentiment, with capital increasingly flowing into Bitcoin products. For example, Bitcoin ETFs recorded a net inflow of $368 million on September 9, the largest single-day inflow since August 8. Fidelity’s FBTC led the inflows with $156.5 million, while BlackRock’s IBIT added $289.8 million on September 3. Bitcoin ETFs now hold $145.2 billion in assets, representing 6.5% of Bitcoin’s total market capitalization, with cumulative inflows reaching $54.8 billion.

The divergence in performance between the two asset classes highlights Bitcoin’s relative stability as a “defensive” investment compared to Ethereum’s more volatile nature. For example, Ethereum’s price fell 3.3% on a weekly basis, while Bitcoin rose 2.1%. This trend aligns with historical patterns, where Ethereum ETFs tend to experience outflows in September, a trend observed in 2024 when Ethereum ETFs saw $46.5 million in outflows during the same period. In contrast, Bitcoin ETFs historically perform well during such months, with a $1.26 billion inflow recorded in September 2024.

Analysts attribute the recent Ethereum ETF outflows to macroeconomic concerns and a strategic rebalancing of portfolios ahead of the Federal Reserve’s upcoming interest rate decision on September 17. The anticipation of a potential half-point rate cut has increased investor interest in Bitcoin as a safer asset. Illia Otychenko, lead analyst at CEX.IO, noted that “capital rotation patterns suggest funds are shifting back into Bitcoin from Ether,” indicating a change in investor preference. This behavior is further supported by the 15% surge in short-dated implied volatility for both Bitcoin and Ethereum over the weekend, signaling increased expectations for price movement.

Despite the recent outflows, Ethereum ETFs have maintained positive cumulative inflows, reaching $13.34 billion. However, these inflows are largely concentrated in BlackRock’s ETHA fund, which accounts for $13.1 billion of the total. Ethereum’s structural disadvantages, including the inability of U.S. ETH funds to stake their holdings, have contributed to its weaker performance in risk-off environments. In contrast, Bitcoin’s ETFs continue to attract capital due to their perceived stability and yield potential. This dynamic raises questions about the long-term appeal of Ethereum ETFs, particularly in times of macroeconomic uncertainty.