🌎 Ethereum ETFs Face $5.7M Outflows Amid Investor Reluctance

Spot Ethereum exchange-traded funds (ETFs) experienced seven consecutive days of outflows, shedding over $5.7 million in assets on Friday, Aug. 23. This brings the cumulative figure to $464 million, according to data by SoSoValue.

Cumulative net assets locked in these Ethereum (ETH) ETFs stand at approximately $7.65 billion. The Grayscale Ethereum Trust holds $5 billion, followed by the Grayscale Mini Ethereum Trust with $1.01 billion. Other ETFs from Blackrock, Fidelity, Bitwise, and VanEck also contribute to these figures.

Institutional Investors’ Reluctance

Many institutional investors are hesitant to invest in Ethereum ETFs, opting instead to focus on Bitcoin for their diversification efforts. Crypto analyst Noelle Acheson noted that, similar to the metal industry where gold ETFs hold over $100 billion in assets compared to silver ETFs’ less than $20 billion, Ethereum ETFs might see more inflows in the future.

The Opportunity Cost

One reason Ethereum ETFs are struggling is the opportunity cost of holding them versus directly buying Ether. Buyers of the Grayscale Mini Ethereum ETF pay a small expense ratio of 0.15%, but they miss out on potential earnings from staking.

Data from StakingRewards indicates that Ethereum yields about 3%, or $300 if you invest $10,000. Ethereum’s net staking inflow has risen in 20 of the past 30 days, reaching over $93.7 billion. Because Ether ETFs track Ethereum prices, many investors prefer holding Ether directly.

Ethereum’s Underperformance Compared to Bitcoin

Another factor is Ethereum’s performance relative to Bitcoin this year. Bitcoin has increased by over 45%, while ETH is up by less than 20%. This underperformance is partly due to significant competition from Solana (SOL) and Tron (TRX).

Tron has become a major player in stablecoin transactions, handling daily volumes of over $40 billion. Solana has also gained traction due to its meme coins, becoming the largest chain in decentralized exchange (DEX) volumes in July, handling over $58 billion.

The sluggish performance of Ethereum ETFs may be a warning sign for financial services companies considering launching other altcoin ETFs, such as those for Solana and Avalanche.