Grayscale's recently converted Ether ETF, the Grayscale Ethereum Trust (ETHE), has experienced very large outflows since July 24, but analysts believe these outflows could stabilize by the end of this week. In turn, this could potentially boost ETH prices. Despite the recent outflows, BlackRock's CIO Samara Cohen and other analysts are still optimistic about the long-term role of crypto ETFs in diversified portfolios. The mainstream adoption of crypto is also expected to increase as regulatory clarity and real-world asset tokenization drive market growth.
Grayscale ETH ETF Outflows Expected to Stabilize
Massive outflows from Grayscale's recently converted Ether exchange-traded fund (ETF), the Grayscale Ethereum Trust (ETHE), are expected to subside by the end of this week. This could potentially cause an upward shift in the price of ETH, according to Steno Research senior analyst Mads Eberhardt.
In a July 30 post on X, Eberhardt shared that he is confident that the outflows from Grayscale's ETHE, which have persisted for days, will soon start slowing down. Since its conversion to an ETF on July 24, ETHE experienced outflows of more $1.7 billion, accounting for almost 18% of its initial $9 billion in assets. This prevented Ethereum ETFs from achieving net inflows, despite consistently positive flows from the other eight ETH ETFs.
Among these, BlackRock’s iShares Ethereum Trust (ETHA) has received the largest cumulative inflows of $500 million, followed by the Bitwise Ethereum ETF (ETHW) with $276 million and the Fidelity Ethereum Fund (FETH) with $244 million.
Despite Grayscale’s large outflows, Eberhardt is still optimistic, and drew parallels to the Grayscale Bitcoin ETF, which saw outflows decreasing after the eleventh trading session. He also believes that the peak outflow for the Grayscale Ethereum ETF will happen this week, which will then lead to a potential price increase for ETH once this period passes.
Pseudonymous trader Evanss6 agrees with this, and compared the launch of spot Bitcoin ETFs to Ethereum ETFs. The trader pointed out that Bitcoin ETF outflows bottomed on the seventh trading day. Bitcoin then surged by close to 92% in the next 50 days. In contrast, Grayscale's Ether ETF reached 17.3% outflows in just four days, with a less severe impact on ETH's price relative to BTC.
Ethereum ETFs See Fourth Day of Outflows
Yesterday, the nine U.S. spot Ethereum ETFs saw a total of $98.29 million in outflows, making it the fourth consecutive day of negative flows. The Grayscale Ethereum Trust (ETHE) was the main contributor to these outflows after it recorded $210.04 million in net outflows, according to data from SosoValue.
Ethereum ETF Flow (Source: Farside Investors)
In contrast, BlackRock’s ETHA led the inflows with $58.17 million, followed by Fidelity's FETH with $24.82 million, VanEck's ETHV with $10.91 million, and Bitwise's ETHW with $10.45 million in net inflows. The Grayscale Ethereum Mini Trust saw $4.9 million in net inflows, while Franklin's EZET logged $2.52 million. The two other spot ETH ETFs managed by Invesco and 21Shares saw no flows.
The total daily trading volume of the spot ether ETFs amounted to $773.01 million, down from $933.86 million on Friday and $955.85 million on Thursday.
Bitcoin ETF Flow (Source: Farside Investors)
Meanwhile, the 11 spot Bitcoin ETFs in the U.S. saw $124.13 million in net inflows on Monday. BlackRock’s IBIT recorded net inflows of $205.62 million, making it the only Bitcoin fund to record net inflows on the day. Grayscale’s GBTC logged $54.29 million in net outflows, Bitwise’s BITB saw $21.3 million flow out, and Fidelity’s FBTC recorded $5.89 million in net outflows. The total trading volume of the spot Bitcoin ETFs was higher on Monday, reaching $2.68 billion compared to $2.04 billion on Friday and $1.51 billion on Thursday.
Crypto ETFs to Join Model Portfolios by 2024
Digital currency-backed ETFs are expected to be incorporated into "model portfolios" by the end of 2024, according to Samara Cohen, BlackRock’s chief investment officer for ETF and Index Investments. In a July 29 Bloomberg interview, Cohen talked about the ongoing risk analytics and due diligence being conducted by major wirehouses like Morgan Stanley, Wells Fargo, and UBS regarding crypto ETFs. According to Cohen, these firms are examining the roles of Bitcoin and Ether in their portfolios.
Cohen believes that crypto ETF allocations to model portfolios will increase by the end of this year and into next year. Model portfolios offered by large brokerage firms aim to balance risk and return through diversified investment strategies. BlackRock projects that model portfolio management will grow from its current $4.2 trillion to $10 trillion in the next five years.
Salim Ramji, global head of iShares and index investments at BlackRock, pointed out that this growth reflects how fiduciary advisers are increasingly conducting business. Cohen added that Bitcoin and Ether serve as valuable portfolio diversifiers because of their distinct asset classes and use cases.
Despite the recent net outflows from spot Ethereum ETFs, Cohen is still confident in their strong launch and their role as access points for investors looking for ETH exposure. Despite the Grayscale Ethereum Trust losing $1.7 billion since its spot ETF conversion, about 10% of that has moved into the zero-fee Ethereum Mini Trust.
Cohen also mentioned that there is unlikely to be a spot ETF for altcoins like Solana in the near term. Robert Mitchnick, BlackRock’s head of digital assets, agreed with this at the Bitcoin 2024 conference, where he stated that a long list of crypto ETFs is not expected.
Crypto Set to Go Mainstream
Crypto is set to go mainstream as regulatory clarity, publicly-traded crypto funds, and real-world asset (RWA) tokenization drive adoption, according to Jonathan Steinberg, founder and CEO of asset manager WisdomTree. In a July 29 interview on CNBC, Steinberg also talked about the importance of Republican presidential candidate Donald Trump’s July 27 speech at the Bitcoin 2024 conference in Nashville. Trump’s ambitious tone on crypto and Bitcoin suggests that US political leaders may soon provide much-needed regulatory clarity for the industry.
According to Steinberg, Trump’s promise of regulatory clarity for crypto and digital assets will positively impact not only the crypto asset class but also blockchain-enabled finance. He expects the narrative around crypto to expand beyond just core assets like Bitcoin and Ethereum to include broader asset tokenization.
The RWA market is projected to reach $2 trillion by 2030, according to McKinsey & Company. Traditional financial institutions are already entering the market with tokenized RWA products like BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) and Franklin OnChain US Government Money Fund (FOBXX).
Goldman Sachs is also preparing to launch three new tokenization products later this year. Even though it was only launched less than four months ago, BlackRock's BUIDL currently holds more than $500 million worth of tokenized Treasurys, according to Ethereum block explorer Etherscan.
