Investors Flee ETH ETFs Amid Staking Gap and Rate-Cut Doubts

Spot Ethereum (ETH) exchange-traded funds (ETFs) have experienced a significant outflow of approximately $1.04 billion over six consecutive trading days, driven by growing macroeconomic uncertainties and diminished expectations around rate cuts. The largest outflow occurred on Friday with $446.7 million, while the smallest outflow was $38.2 million on Wednesday. On Monday alone, these ETFs saw a net outflow of $96.7 million, with BlackRock’s ETHA leading the exodus with $192.7 million in withdrawals. This outflow was partially offset by inflows into Fidelity’s FETH, Grayscale’s ETHE, and its mini fund, totaling $95.5 million in combined inflows [1].

The decline in investor confidence coincided with a reassessment of the Federal Reserve’s monetary policy trajectory. While the CME FedWatch Tool indicates a 100% probability of a 25 basis point rate cut in September, experts have raised concerns that such cuts may not deliver the anticipated economic stimulus. JPMorgan Asset Management’s Chief Global Strategist, David Kelly, highlighted that lower rates could dampen business sentiment and reduce retirement income, exacerbating macroeconomic risks [1]. The shifting sentiment is evident across financial markets, with Treasury yields remaining subdued, the US dollar trading sideways, and gold reaching a record high, all of which signal increased defensive positioning [1].

Ethereum ETF outflows are occurring in a broader context of mixed investor behavior. While some funds struggle to retain assets, others continue to attract inflows. For example, Fidelity’s FETH recorded $75 million in inflows, while Grayscale’s ETHE and its mini product attracted $9.5 million and $11 million, respectively. These contrasting flows underscore the diverse investor strategies at play and suggest that while Ethereum ETFs are under pressure, they still maintain a degree of appeal to certain market participants [2]. The total trading volume for ETH ETFs reached $1.52 billion on Monday, with net assets declining to $27.39 billion, equivalent to 5.28% of Ethereum’s market cap [1].

The absence of staking mechanisms in U.S. spot ETH ETFs appears to further challenge their appeal. Unlike on-chain Ethereum holders, who can earn staking rewards, these ETFs do not engage in staking activities or generate yield. BlackRock’s iShares Ethereum Trust, for instance, explicitly states that it will not use any portion of its ETH for staking. This structural limitation reduces the incentive for long-term holdings, particularly in periods of price volatility or drawdowns [3]. Analysts note that if the SEC were to approve staking within these ETFs—potentially as soon as late 2025—it could significantly boost demand by adding an estimated 3%+ in annual yield [3]. This could represent a structural shift in how capital flows into ETH, particularly for institutional investors.

Amid the ETH ETF outflows, spot Bitcoin ETFs have shown a contrasting trend. On Monday, they recorded a net inflow of $368.25 million, ending a two-day outflow streak. Total trading volume reached $3.02 billion, and net assets increased to $145.41 billion, lifting cumulative net inflows to $54.86 billion. This shift suggests that while Ethereum ETFs face challenges, the broader crypto ETF market remains dynamic, with investors rotating capital between assets based on market conditions and product features [1].

Technical indicators suggest that Ethereum is currently hovering near key support and resistance levels, with analysts noting that the $4,250–$4,300 range is critical for the immediate outlook. Bitcoin faces similar dynamics, with liquidation data showing strong interest near $108,800 and resistance around $114,200 [1]. These levels will be closely watched as investors and traders assess the potential for further price movements.

Source: [1] Spot Ether ETFs Bleed $1B as Macro Fears Grow (https://cointelegraph.com/news/spot-ether-etfs-bleed-1b-amid-macro-uncertainty) [2] Spot ETH ETFs Face Alarming Outflows: What's Driving the Market Shift? (https://www.mexc.co/fil-PH/news/spot-eth-etfs-face-alarming-outflows-whats-driving-the-market-shift/89883) [3] Ethereum ETFs hit by $1 billion pullback as lack of staking yield tests conviction (https://cryptoslate.com/ethereum-etfs-hit-by-1-billion-pullback-as-lack-of-staking-yield-tests-conviction/)