ETF Launch Impact
On July 23, spot ETFs for Ethereum launched in the US. As predicted, the ETH/BTC rate dropped because ETHE fund assets flooded the market. In just three days, the fund lost $1.2 billion in investments, resulting in a net cumulative inflow of -$179 million.
Fund Dynamics
ETHE was originally a trust fund, trading at a discount to its underlying asset for years. When it became clear that the SEC would approve ETFs for altcoins, investors began buying ETHE shares. Consequently, the price difference between the shares and Ethereum quickly disappeared.
Investor Reactions
The conversion of the fund to a spot ETF unlocked assets. Investors then started selling shares and locking in profits. A similar situation occurred when the GBTC trust fund converted in January, causing Bitcoin to drop 21% despite significant inflows to the new ETFs.
Potential Market Impact
In the six months following the Bitcoin ETF launch, GBTC lost 56.2% of its capital, shrinking to 271,200 BTC. If ETHE loses investments at the same rate, 1.64 million ETH worth $5.3 billion could enter the market in six months.
Balancing Inflows and Outflows
The key question is whether inflows to other Ethereum ETFs can offset ETHE outflows. Optimistic forecasts estimate $10 billion annually or $5 billion in the first six months, neutralizing Grayscale’s negative impact. However, baseline and pessimistic estimates are more modest. For instance, JPMorgan predicts inflows won’t exceed $3 billion by year-end if the SEC doesn’t approve staking for ETFs.
Future Prospects
If this happens, the ETH/BTC rate may continue to decline in the medium term. While Bitcoin has not experienced a single day of negative cumulative investment in US spot funds, Ethereum ETF figures remain in the “red” zone.
