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In summary
- Ethereum ETFs have seen a positive post-election turn, with cumulative net flows reaching $238 million, recouping earlier losses.
- The launch of Ethereum ETFs in July was problematic, but optimism following Trump’s victory has revived interest, with record inflows of $796 million.
- Ethereum ETFs benefit from the pro-crypto policy expected under the Trump administration, building confidence in institutional and retail investors.
Ethereum ETFs are riding a wave of post-election momentum, reversing a tide of billions of dollars in outflows that had dampened investor enthusiasm when they launched this summer.
Cumulative net flows to Ethereum spot ETFs turned positive on Tuesday, reaching $94 million, according to data from SoSo Value. Representing the total amount of money nine investment products for Ethereum have received so far, the figure had risen to $238 million as of Thursday.
When Ethereum ETFs debuted in July, the initial picture was ugly. The Grayscale Ethereum Trust (ETHE) saw outflows worth $1.7 billion in its first five days of trading, losing cash as the price of Ethereum fell to $3,400, according to data from SoSo Value.
Analysts attributed ETHE’s considerable run of outflows to the product’s relatively high expense ratio, making it more expensive to maintain than alternatives. Shortly after, the Cryptocurrency market fell amid macroeconomic jitters and the yen carry trade that took global markets by surprise.
“The launch of Ethereum spot ETFs came at an awkward time,” Matt Mena, research analyst at 21Shares, told Decrypt. “But now optimism has returned in full force.”
While investors withdrew $3.2 million from Ethereum ETFs in cash on Thursday, the previous six days represented a record period. Surge on Election Day, investors allocated $796 million to the products, marking their longest and largest streak of inflows on record.
Investors appear to be more comfortable with Ethereum after Donald Trump’s victory, Mena said, pointing to hopes for a pro-crypto administration under the president-elect. At the same time, he said pro-cryptocurrency members of Congress should also “encourage more builders to develop applications on the Ethereum network” amid a new tone on Capitol Hill.
“As the US welcomes more favorable regulatory administration, TradFi institutions and retail cryptocurrency traders feel more confident about the promise and resilience of digital assets,” said Plume CEO, Chris Yin, at Decrypt. “We are starting to see excitement that has been expected for a long time.”
Expectations of favorable crypto policy and regulation are generating excitement around Ethereum, according to FalconX Head of Research David Lawant, who told Decrypt that a regulatory framework for stablecoins would validate one of Ethereum’s use cases.
However, with Bitcoin spot ETFs seeing billions of dollars of inflows since Trump’s victory, he also told Decrypt that the recent wave of inflows to Ethereum ETFs is also likely part of a spillover effect among institutional and retail investors.
“There will be people who will start to look and see what is in this industry besides Bitcoin,” Lawant said. “And the first thing we’ll probably run into is Ethereum, the only other crypto asset that has a spot ETF approved right now.”
Lawant added that there is a degree of reflexivity that is likely impacting the flows. As the price of Ethereum rises, investors are more likely to pay attention to ETFs and potentially allocate funds to them, he said.
Overall, ETHE outflows have overshadowed the launch of spot Ethereum ETFs, but their launch has been quite successful when looking beyond that particular fund, Lawant said. BlackRock’s Bitcoin ETF has attracted $1.7 billion alone, while seven others have collectively attracted $1.8 billion.
“It is important to note that (the inflow of) $3.5 billion into ETFs that were launched less than four months ago is not a bad number at all,” he said.
Edited by Andrew Hayward
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