Bitwise CEO Hunter Horsley has explained why he believes recently launched spot Ethereum exchange-traded funds (ETFs) have seen significantly lower trading volumes and inflows compared to their Bitcoin counterparts.
In an Oct. 21 post on X, Horsley acknowledged that Ethereum ETFs have underperformed but pointed out that the funds from his firm, BlackRock and Fidelity, are still among the top 25 fastest-growing new ETPs this year.
SoSoValue data shows 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.
Overall, data shows that the Ethereum ETFs have experienced negative flows of approximately $500 million thanks to the significant outflows from Grayscale Ethereum Trust and the tepid demand for the other ETH funds.
Why Ethereum ETFs are struggling
Horsley highlighted several reasons behind Ethereum ETFs’ slow start, explaining that one key factor that impacted the products was the timing of their launch.
According to him, the Ethereum ETFs launched during the summer, a traditionally slow investment period during which investors monitor market activity rather than take on new projects.
He furthered that the Ethereum ETFs debuted in a relatively flat market, while Bitcoin ETFs entered the scene during a bull market, which drew more attention and investment. Horsley noted that many investors were still focusing on Bitcoin when Ethereum ETFs launched, making it difficult for Ethereum to capture the spotlight.
He explained:
“For many traditional investors, some time has been and continues to be needed to figure out how to incorporate Bitcoin after the launch of the ETPs. Ethereum arriving before that was solved, made it hard to turn attention to it.”
What about staking?
Horsley also addressed concerns about whether the lack of the staking feature was significantly impacting the Ethereum ETFs.
The Bitwise CEO stated that he doesn’t believe the lack of staking yield is a significant issue, noting that most ETH holders aren’t currently staking their assets.
However, Horsley highlighted the success of Bitwise’s European franchise, which offers a fund (ET32) that provides exposure to Ethereum while capturing staking rewards. He said this fund has been “growing nicely,” and a similar feature would benefit the US-based funds.
Staking is a critical element of Ethereum’s proof-of-stake (PoS) system, where users lock up their Ethereum to validate transactions and earn rewards. However, the US Securities and Exchange Commission (SEC) has expressed concerns that staking services may qualify as unregistered securities offerings and has taken legal actions against crypto platforms like Kraken.
The ETF issuers unsurprisingly excluded staking from their funds in response to these legal risks.
Despite these challenges, Horsley emphasized that it’s too early to judge Ethereum ETPs’ long-term potential. He believes “the story for Ethereum ETPs is just beginning.”
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