Bitwise CEO Hunter Horsley has addressed the significantly lower trading volumes and inflows of Ethereum exchange-traded funds (ETFs) compared to their Bitcoin counterparts. Despite underperformance, funds from BlackRock, Fidelity, and Bitwise remain among the top 25 fastest-growing new ETPs this year. BlackRock’s ETHA has attracted $1.45 billion in net inflows, while Fidelity’s FETH and Bitwise’s ETHW have seen inflows of $498 million and $321 million, respectively. However, Ethereum ETFs have experienced negative flows of approximately $500 million due to significant outflows from Grayscale Ethereum Trust and tepid demand for other ETH funds.
Horsley identified several reasons behind Ethereum ETFs’ slow start, including the timing of their launch during the summer, a traditionally slow investment period. Additionally, launching in a relatively flat market while Bitcoin ETFs entered during a bull market drew attention and investment away from Ethereum. Many traditional investors were still focused on Bitcoin at the time of Ethereum ETFs’ launch, making it difficult for Ethereum to capture the spotlight.
The lack of the staking feature in Ethereum ETFs has raised concerns about their impact on the funds. Horsley, however, believes that the absence of staking yield is not a significant issue as most ETH holders are not currently staking their assets. Bitwise’s European franchise offers ET32, a fund that captures staking rewards while providing exposure to Ethereum, which has seen success. Despite legal risks associated with staking services, the SEC’s concerns have led ETF issuers to exclude staking from their funds.
Horsley emphasized that it is too early to judge the long-term potential of Ethereum ETPs, stating that “the story for Ethereum ETPs is just beginning.” He pointed out that the success of Bitcoin ETPs took time for traditional investors to incorporate, indicating a similar adjustment period may be needed for Ethereum. Overall, Horsley remains optimistic about the future of Ethereum ETFs despite the challenges they currently face in the market.
In conclusion, despite the slow start and challenges faced by Ethereum exchange-traded funds, there remains potential for growth and success in the future. The timing of their launch, competition from Bitcoin ETFs, and the exclusion of staking features have all contributed to the struggle of Ethereum ETFs in the market. However, with continued investor education and market awareness, Ethereum ETFs may see increased interest and inflows over time. The evolving regulatory landscape and advancements in staking technology will also play a role in shaping the future of Ethereum exchange-traded funds.
