Ether ETFs Experience Major Inflows Amidst Price Drop

Ether ETFs See Significant Inflows Despite Price Drop

On Monday, U.S.-listed spot ether (ETH) exchange-traded funds (ETFs) experienced net inflows totaling nearly $49 million, even as the price of ether plummeted by 20%. This stark contrast highlights a resilient demand for the second-largest cryptocurrency by market capitalization.

The sharp decline in ether’s price marked its most substantial single-day drop since 2021, largely triggered by the notable actions of Jump Crypto, a prominent crypto trading firm, which transferred significant amounts of ether to centralized exchanges, possibly in anticipation of sales. The broader crypto market also faced pressure, with over $340 million in ETH futures liquidations compounding the losses for traders.

Despite the turmoil, professional investors took the opportunity to buy the dip. Data from SoSoValue reveals that ether ETFs traded over $715 million on Monday, marking their highest trading volume since July 30. BlackRock’s ETHA led the charge with inflows of $47 million, while both Fidelity’s FETH and VanEck’s ETHV saw inflows of $16 million each. In contrast, Grayscale’s ETHE was the only product to record outflows, amounting to $46 million, though their smaller Ethereum Mini Trust (ETH) managed to attract inflows of $7 million.

However, since their launch on July 23, these products have collectively seen net outflows of $460 million, suggesting that long-term demand for ETH ETFs has not yet fully materialized. This stands in stark contrast to Bitcoin ETFs, which recorded over $1 billion in net inflows within their first 12 days of trading.

ETF flows are an important indicator for identifying market trends and reflecting where investors are directing their capital. Interestingly, some market analysts have noted that applications built on the Ethereum network have demonstrated resilience despite the steep price declines, indicating strong underlying fundamentals.

“Ether’s disproportionate price drop was primarily driven by the Jump Crypto sell-off and the liquidation of various whale wallets,” stated Alice Liu, lead researcher at CoinMarketCap, in an email to CoinDesk. “On a brighter note, LSDFi has proven robust under pressure: there has been no significant increase in Lido’s withdrawal queue, and no liquid staking depends on alternative projects.”

LSDFi, or liquid staking derivatives finance, refers to a set of blockchain-based activities enabling users to earn rewards while maintaining liquidity through derivative tokens.

Liu continued, “Another silver lining for ETH is that the recent liquidation appears to have revitalized the DeFi market, with activity on DeFi platforms picking up significantly on the network. Additionally, gas fees have returned to a more manageable range of 10-15 Gwei after peaking at 370 Gwei earlier in the day,” highlighting the fees users incur to utilize the Ethereum network.