(Bloomberg) -- It’s been a month since the much-anticipated Ether ETFs launched in the US — but investors still don’t seem too interested.
The nine exchange-traded funds that hold the second-largest cryptocurrency directly saw investor outflows Thursday for a sixth consecutive day, the longest streak of withdrawals since their debut on July 23. During the same period, US ETFs holding crypto bellwether Bitcoin saw inflows daily, according to data compiled by Bloomberg.
“Bitcoin is generally the crypto ‘onramp’ for traditional investors,” Noelle Acheson, author of the Crypto Is Macro Now newsletter. “While Ethereum may eventually catch up as diversification becomes more of a priority, for now Bitcoin is likely to continue to outperform.”
The much-hyped debut of crypto ETFs in the US was considered a watershed moment for the digital-asset industry, which had been long-battling with regulators over putting out funds that are physically backed by Bitcoin and Ether. Eight issuers including BlackRock Inc., Invesco Ltd. and Fidelity Investments were among those that received the green light from the US Securities and Exchange Commission in July. In the first three weeks of trading, Ether ETFs recorded millions of dollars in net outflows — thanks largely to the Grayscale Ethereum Trust, which was converted into an ETF from an existing fund that investors have been steadily cashing out of. The net outflows for the Ether ETFs are about $458 million.
“Volumes have collapsed across all venues this week and Grayscale outflows continue,” said Matthew Sigel, head of digital assets research at VanEck. “We’ve seen a total sentiment and positioning re-set that should bode well for September and October.”
On Thursday, investors pulled a net $1 million from the US spot Ether ETFs, according to Bloomberg Intelligence. Ether ETFs also experienced the lowest daily trading volume day since their launch.
“I don’t necessarily think it’s surprising that ETF investors, who are far less crypto native, are taking some risk off the table in anticipation of Jackson Hole and as rate expectations are tweaked,” said Stephane Ouellette, co-founder and chief executive officer of FRNT Financial.
Over the past two weeks, market participants have been eagerly anticipating the Federal Reserve’s annual Jackson Hole gathering for more clarity on the future of monetary policy. Earlier Friday, Fed Chair Jerome Powell expressed confidence around inflation being on a sustainable path back to 2% and signaled for rate cuts.
“It’s important to note that whatever outflows happen to the ETF, it is a relatively small section of the market,” Ouellette said. The funds account for about 2% of Ether’s market capitalization, he said.
Ether jumped as much as 4% to $2,730 on Friday as financial markets rallied on Powell’s comments.
The launch of the Ether ETFs was much more muted compared to that of the Bitcoin ETFs, which kicked off a historic start in January. The price of the world’s largest cryptocurrency surged to a record level two months later. Bitcoin ETFs issued by BlackRock and Fidelity became the only two funds in the ETF universe to attract more than $3 billion in their first 20 days of trading, according to Bloomberg Intelligence.
--With assistance from David Pan and Isabelle Lee.
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