Investors Flock to Bitcoin ETFs, Abandon Ethereum Amid Fee War

U.S. spot Bitcoin and Ethereum exchange-traded funds (ETFs) experienced significant inflows in recent weeks, signaling a continued shift in investor interest toward digital assets. According to market data, Bitcoin ETFs recorded $757 million in net inflows on September 10, marking their strongest inflow since July. Fidelity’s FBTC led the inflows with $299 million, followed by BlackRock’s IBIT at $211 million. Over the past ten days, Bitcoin ETFs have seen a net inflow of $1.39 billion, while Ethereum ETFs faced outflows of $668 million during the same period, reflecting a notable divergence between the two largest cryptocurrencies.

The Bitcoin ETF landscape has been shaped by competitive dynamics between major fund providers, most notably the iShares Bitcoin Trust (IBIT) and the Grayscale Bitcoin Trust (GBTC). As of September 9, iShares managed $84.2 billion in assets under management (AUM), while Grayscale held $19.9 billion. The iShares ETF, launched in January 2024, quickly gained traction, while Grayscale’s AUM has steadily declined amid investor preference for lower-fee alternatives. Over the past year, iShares has seen an 82% increase in AUM, while Grayscale’s fund has shrunk by 17%. The difference in expense ratios—0.25% for iShares versus 1.5% for Grayscale—has played a pivotal role in asset reallocation, particularly among institutional investors with long-term horizons.

Ethereum ETFs, in contrast, showed a more mixed performance. Despite recent outflows earlier in September, Ethereum ETFs saw renewed demand on September 10, adding $171 million in net inflows. BlackRock’s ETHA led the inflow with $74.5 million, while Fidelity’s FETH attracted $49.5 million. Ethereum’s price has climbed above $4,400, and investors are closely watching the Federal Reserve’s upcoming meeting for potential rate cuts. Market analysts note that while the initial rate decision is important, the broader implications—particularly the potential rotation of trillions in money market funds into risk assets—could play a more significant role in shaping future inflows.

Futures trading data further highlights the divergent trajectories of Bitcoin and Ethereum. Ethereum’s 24-hour futures volume reached $49.4 billion, surpassing Bitcoin’s $42.9 billion. This suggests growing speculative interest in Ethereum and altcoins, despite the ETF outflows. Stephen Gregory, founder of crypto trading platform Vtrader, attributed this trend to anticipation of macroeconomic developments and a possible 25-basis-point rate cut by the Federal Reserve. He noted that altcoins’ share of total trading volume has risen to 50% this week, compared to an average of around 40% for weeks prior, signaling a potential structural shift in market sentiment.

Bitcoin’s ETF inflows have been driven in part by first-time institutional allocations and FOMO-driven trading among new wealth managers. While Ethereum has outperformed Bitcoin year-to-date with a 31% gain, Bitcoin’s 19% gain remains solid, according to CoinGecko data. However, the rotational trade toward Ethereum in futures and altcoins, combined with the ETF outflows, suggests a more nuanced market dynamic. Options market data indicates that implied volatility remains low, with most participants factoring in a 25-basis-point rate cut. This tempered outlook underscores a cautious but generally optimistic market stance ahead of the Fed’s decision.