By Michael Scott
Spot Ethereum ETFs encounter a rocky start, with JP Morgan analysts declaring Bitcoin comparison an unfair proposition.
The spot Ethereum ETFs have suffered significant outflows since their debut, with JP Morgan analysts highlighting why a Bitcoin comparison is unfair. The analysts fault those drawing direct comparisons of spot ETH ETFs with BTC’s much-hyped debut on Wall Street is unhelpful.
Delving into the data shows nine investment vehicles for Ethereum ETFs have bled $476M in net outflows since their July 23 unveiling through August. The spot ETH ETFs’ bleeding coincides with the underlying asset plunging 41% from $4,070 on March 12 to around $2,400, per CoinGecko data.
JP Morgan analysts consider that comparing the spot ETH ETFs to the Bitcoin ETFs launched in January shows a startling difference. The Friday note by the analysts pinpointed that the cumulative net inflows for spot BTC ETFs surged to $5.4 billion a month since their debut. The considerable inflow lifted the underlying asset above the $50,000 price level, breaching the ceiling untested for several years.
Bitcoin and Ethereum ETFs Disparity
The JP Morgan analysts acknowledge that the contrasting performance of Ethereum and Bitcoin ETFs is evident and entirely unfair when comparing the two products. The analysts elaborated on the disparity in the flows caused by the BTCs’ established reputation and growing preference for being a “store of value.”
The analysts believe the inability of the spot Ethereum ETFs to benefit from the staking rewards leaves them deficient in reflecting the underlying asset’s total value.
The analysts likened the comparison of ETH flow magnitude with the BTC counterparts mirrors comparing apples to oranges. The analysts underscore the disparity in the underlying assets market cap, opportunity costs, and usage.
Despite faulting the comparison, the JP Morgan analysts indicated that the unveiling of spot ETH ETFs matches the BTC initial run. The analysts show in-line performance when considering the assets under management (AUM) value relative to the coin’s market cap.
BTC value surpasses thrice that of ETH at $1.12 trillion and $282B, respectively. A glance at the initial trading month shows the AUM of the spot BTC ETFs was at 3% of the BTC market cap, while ETH ETFs account for 2.3%.
The spot Ethereum ETFs debut marked a historic win for the industry that was hardly unexpected. The Gary Gensler-led Securities and Exchange Commission (SEC) hurriedly approved the products. The approval has seen BlackRock benefit from the $1 billion inflows burst.
In contrast, Grayscale’s Ethereum Trust (ETHE) outflows have engulfed the new products since their launch. The ETHE has seen the once $4.1 billion bleed $2.6 billion in net outflows. The consistent erosion in assets since July 23, surprisingly, when other ETFs hold the line.
Analysts consider the outflows’ primary catalyst to be ETHE’s high expense ratio. Also, the experts attribute the outflow to the traders capitalizing on the declined discount relative to the ETH holding.
The past five trading days saw six spot ETH ETFs witness subsiding flows with movement flat in both directions. The JP Morgan analysts illustrated that trading volumes for the spot BTC ETFs are sixfold that of ETH-based counterparts.
Bitcoin Tumbles as Ethereum Plunges to 2024 Low
Bitcoin and Ethereum prices sunk similarly to other significant crypto assets as investors rushed to sell risk assets. Ethereum plunged to set the lowest price this year with nearly 8% downside movement in a 24-hour period, per CoinGecko.
The largest altcoin saw its price dip on Friday to trade at $2,193 – a price never seen since 2023. The past week’s performance saw ETH fall 13%, the worst of the large-cap crypto assets.
Bitcoin price witnessed a steep fall by 5% to trade at $52,690, though it somewhat regained ground to $53,516. BTC has yet to shake off recent struggles as investors race to exist from the spot ETFs.
The trend to the weekly lows echoes the across-board dip witnessed on August 5. The crypto market cap suffered a 6% decline in the past 24 hours to $1.96 trillion. It marks the initial drop to trade below the $2 trillion waterline since February.
The plunge in crypto aligns with the stock market’s worst week since March last year. Notably, tech stocks emerged as the loss bearer for the sell-off as investors cut on their risk assets following the weaker-than-expected data.
The decline is surprising as investors anticipate the Federal Reserve will announce the rate. cuts. However, the market is uneasy and uncertain about the impact size.