The first day of availability of exchange-traded funds (ETFs) on Ethereum showed impressive activity, with more than $1 billion tradedaccording to Bloomberg data. However, despite the high volume of transactions, net inflows were $106.7 millionaccording to tracker SoSoValue.
A significant portion of the outflows occurred in Grayscale’s Ethereum Trust (ETHE), which saw withdrawals totaling $484 millionIn comparison, spot Bitcoin ETFs experienced much higher trading volume, $4.5 billion at launchalthough only about $600 million came from net inflows.
The new ETFs
Among the new Ethereum ETFs, The BlackRock iShares Ethereum Trust (ETHA) led in terms of inflowswith $266.5 million, followed by Bitwise’s Ethereum ETF (ETHW), which attracted $204 million. With a total trading volume of approximately $1.077 billion, Ethereum ETFs captured around 20% of the volume recorded by spot bitcoin ETFs when they debuted in January.
Despite some analysts’ expectations that the launch of the Ethereum ETF might not meet expectations due to the absence of a staking mechanism in the ecosystemthe first day has shown significant interest. c
Demand and Price
The approval of Ether (ETH) spot ETFs will likely drive a significant increase in ETH prices due to increased demand from institutions that will buy and hold ETH. This phenomenon resembles the impact seen with Bitcoin (BTC) ETFs earlier in the year, “which reduced the availability of bitcoin on exchanges and resulted in price appreciation,” Binance notes.
According to analysts at Galaxy Digital, ETH ETF inflows are expected to be roughly one-third of BTC ETF inflows, reflecting the differences in market capitalization between the two assets. Institutional acquisition and holding of ETH may reduce the available supply on exchanges, creating upward pressure on prices.
The “digital gold” narrative behind BTC is relatively straightforward, making it easy to explain to traditional capital allocators. In contrast, Ethereum is perceived as a distributed supercomputer, a notion that can be more complex and difficult to sum up in a compelling phrase.
“Some analysts suggest that ETH ETFs could capture some of the investment flows previously directed towards BTC ETFs.“, Binance says. Since many traditional investors prefer market-cap-weighted strategies and may not wish to increase their overall exposure to cryptocurrencies, they may rotate capital from BTC to ETH ETFs. Alternatively, If ETH ETFs make BTC ETFs look like a safer investment, there could be an increase in inflows into BTC ETFs.
Currently, 11.7% of BTC is held on exchanges, compared to 10.3% of ETH. This is partly because a significant amount of ETH is locked in staking and smart contracts. Ether is used extensively in DeFi protocols and other blockchain applications, meaning a significant portion of its supply is tied up in various on-chain activities. This inherent scarcity, combined with new demand driven by ETFs, could result in steeper price movements and increased volatility, presenting both opportunities and risks for investors.
With a smaller market cap for ETH compared to BTC, inflows into ETH ETFs could have a more noticeable effect on the price of ETH.
Source: Ambito
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