Why Are Spot Ethereum ETFs Underperforming?

The launch of a spot Ethereum ETF has not lived up to the high expectations set by a BTC ETF, leading industry experts to analyze the root causes.

According to data from Farside Investors, all spot Ethereum ETFs have seen outflows of $463 million since their inception on July 23 .

Among them, Grayscale's ETHE saw an outflow of US$2.996 billion, BlackRock saw an inflow of US$1.258 billion, and Bitwise saw an inflow of US$321 million.

Hunter Horsley, CEO of Bitwise Asset Management, sheds light on the factors that influence the performance of U.S. spot Ethereum ETFs at X.

Horsley summarized several factors that are not conducive to the successful launch of spot Ethereum ETFs.

First, the timing of launching an Ethereum ETF in the summer could dampen immediate investor interest , as summer is typically a slow season for investors, who “watch but don’t participate in a lot of new projects.”

Secondly, it is also related to market conditions. BTC ETP was launched when BTC was rising, while Ethereum ETP was launched in a sideways market . The lack of bullish momentum in Ethereum prices may be one of the reasons for the muted reaction.

Additionally, the launch of an Ethereum ETF right after the BTC ETF could overwhelm investors who are still getting accustomed to Crypto assets .

For many traditional investors, after ETPs were launched, it took some time to figure out how to incorporate BTC into them. Ethereum came out before this problem was solved, making it difficult to turn people's attention to Ethereum.

Nate Geraci, president of the ETF Store and co-founder of the ETF Research Institute, highlighted the widespread success of crypto asset-related ETFs in 2024.

“Of the 525 ETFs launched by 2024, 13 of the top 25 will be tied to BTC or ETH.”

“If you include the MSTR options strategy ETF, it’s 14. The top 4 ETFs are all spot BTC. 5 of the top 7 are tied to Crypto assets. I call this performance ‘no demand’.”

In response, CoinFund President Christopher Perkins said that products that can generate income can enhance appeal .

“Housley acknowledged the value of the investment but downplayed its direct impact on the ETF’s performance. ET32 is growing rapidly within our European franchise.”

However, Housley added: “ I don’t think the lack of pegging is a big problem. Currently, most ETH is directly owned and therefore can be valued, but about 2/3 of ETH is not valued .”

“But I agree it’s valuable. We have an ETH ETP in Europe and it’s growing very well.”

Industry veteran Dan Tapiero, founder and CEO of 10THoldings, remains optimistic about the future of spot Ethereum ETFs.

"Just wait. They'll do fine."