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The Ethereum ETFs Could Be Entering Prime Time
Is ETH About To Hit An Inflection Point?
Nomatic
November 14, 2024
We’re noticing the early signs of a major trend reversal starting to form with the Ethereum ETFs.
Despite ETH price being down only against BTC, the ETH ETF flows are starting to pick up. Until two days ago the net flows from the ETH ETF were negative. Meaning, new money that was buying the ETH ETF wasn’t keeping pace with Grayscale’s ETHE outflows.
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A Quick Recap On The Grayscale ETHE ETF
ETHE started out as a trust with a very high fee structure and the price of the asset could also deviate fairly dramatically from Net Asset Value (NAV). Meaning, it was a very uncomfortable way to get ETH exposure prior to the ETFs we have now. When Grayscale converted the trust to an ETF (ETHE), they kept the high fee in place which naturally caused a mass exodus to the newer ETF issuers who had lower fees (and some exited the market completely).
The same thing occurred earlier in the year with Grayscale BTC product called GBTC. Here’s a visual of these outflows occurring in both GBTC and ETHE (thanks to Farside for the charts and data):
As you can see, both GBTC and ETHE had dramatic outflows followed by a bit of a leveling off period (we look to be at a leveling off period with ETHE)
A New Trend Is Emerging
With the above context, let’s take a closer look at this trend that’s starting to form with ETH ETF flows post the November 5 election:
All Numbers In $Millions
The diagram shows all the major ETH ETF issuers (note the $3.18Billion that has vacated from ETHE mentioned above). As you can see, flows have bounced around from miniscule to negative in the lead up to the November 5th election. With the election certainty, the market is responding very clearly to an administration that’s likely to be much more favorable to crypto. You can see this visually by the flows highlighted in the red box post election.
Why Does This Matter?
Ethereum has been struggling to find a crypto native bid as of late and until recently, the ETF hadn’t been drawing nearly the same fanfare as the BTC ETFs. However, it appears as those an institutional bid for the ETH ETFs is happening. If this trend continues, these types of inflows could start to have a material impact on price appreciation.
Comparing Flows to BTC On A Relative Basis
BTC as an asset is about 4.6x bigger than ETH when comparing market caps. It’s interesting to gauge the relative flows knowing that disparity in size.
Flows From Nov 6th - Nov 13th:
BTC: $4.73B
ETH: $796.2M
This is a very short sample size, however, over this 6 day period, the BTC ETF brought in ~5.9x ($4.73B) more than the ETH ETF ($796.2M). Or, said another way, the ETH ETF brought in about 16.8% of the BTC ETF over the same timeframe.
The 5.9x isn’t too far off the 4.6 size disparity BTC holds over ETH. It will be interesting to see how this trend moves over the next weeks and months.
Conclusion
This could be a long-awaited bullish signal for ETH, but something we need to continue tracking going forward.
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