Ethereum’s 40% post-ETF drop is an expected ‘sell-the-news’ reaction – Bitfinex Ethereum’s 40% post-ETF drop is an expected ‘sell-the-news’ reaction – Bitfinex
Ethereum ETFs are facing substantial challenges as significant outflows continue to weigh heavily on Ether's performance.
2 min read
Updated: Aug. 19, 2024 at 9:56 pm UTC
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Bitfinex analysts said Ethereum’s (ETH) 40% decline following the launch of spot ETH exchange-traded funds (ETFs) in the US is an expected “sell-the-news” reaction.
According to the latest edition of the “Bitfinex Alpha” report, Ethereum ETFs are facing substantial challenges as significant outflows continue to weigh heavily on Ether’s performance, exacerbating the asset’s underperformance relative to Bitcoin.
The report highlighted the negative net flows of spot Ethereum ETFs — currently at $420 million in outflows — as the main force driving ETH’s price down in recent weeks.
It added that heavy selling from market makers like Jump Trading and Wintermute, along with a macroeconomic shakeup stemming from Japan’s recent rate hikes, have further contributed to the downtrend.
Ethereum weakness
According to the report, the Ethereum ETF market has seen significant fluctuations in fund flows, contributing to the observed weakness in Ether’s price compared to the broader crypto market.
On Aug. 5, the ETH/BTC pair hit its lowest level in over 1,200 days, dropping to 0.0367 — marking a significant decline from its peak in February 2021.
The report that the ETH/BTC pair has been trending downward since the Ethereum Merge in September 2022, and this recent move further deepens concerns about Ethereum’s relative weakness.
Bitfinex analysts believe a key factor contributing to this underperformance is the impact of Bitcoin ETFs, which have successfully directed passive flows and increased demand toward BTC. This dynamic has left Ethereum ETFs struggling to attract the same level of investor interest, even as they attempt to establish themselves in the market.
The persistent weakness in ETH/BTC suggests that deeper market forces are at play beyond the mere availability of institutional investment products.
Divergent ETF performance
Ethereum ETFs have shown some signs of recovery, particularly with BlackRock’s iShares Ethereum Trust (ETHA), which recorded over $100 million in inflows on two separate occasions in late July and early August. As of last week, ETHA’s cumulative inflows had approached $977 million, indicating some resilience in the face of broader market challenges.
However, Grayscale’s ETHE has recorded substantial outflows, totaling over $2.4 billion since its conversion to an ETF. This significant outflow reflects a cautious sentiment — or possibly a negative view — among institutional investors toward this specific ETF.
According to the report, ETHE’s struggle can be attributed to its pricing, which was at a 20% discount to the underlying ETH price even weeks after its conversion. This discount, driven by arbitrage traders taking profits, has persisted, leading to continued outflows, although the pace has slowed recently.
Notably, the rate of ETHE outflows has been faster than those from Grayscale Bitcoin Trust (GBTC). On the 20th trading day post-launch, ETHE assets under management stood at 70% compared to pre-launch figures, while GBTC stood at 76.3% for the same period.
The ongoing trend raises questions about the effectiveness of Ethereum ETFs in balancing market trends between ETH and BTC. The continued underperformance of ETH against BTC suggests deeper market forces at play beyond the mere availability of institutional investment products.
Mentioned in this article
Ethereum 
Bitcoin 
BlackRock 
Bitfinex 
Grayscale Investments 
Jump Crypto 
Wintermute iShares Ethereum Trust ETF Grayscale Ethereum Trust Author 
Gino Matos
Gino Matos is a law school graduate and a seasoned journalist with six years of experience in the crypto industry. His expertise primarily focuses on the Brazilian blockchain ecosystem and developments in decentralized finance (DeFi).
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In this article
Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps).
Bitcoin
$97,609.37
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
BlackRock
BlackRock, synonymous with global asset management, is an American multinational investment management corporation based in New York City.
Bitfinex
Bitfinex is a digital asset trading platform offering state-of-the-art services for digital currency traders and global liquidity providers.
Grayscale Investments
Established in 2013 by Digital Currency Group, Grayscale Investments is a trusted authority on digital currency investing and cryptocurrency asset management.
Jump Crypto
Jump Crypto is a division of Jump Trading Group, a research-driven quantitative trading firm and one of the largest traders, by volume, across traditional asset classes.
Wintermute
Wintermute is a global algorithmic market maker in digital assets globally, in CeFi, DeFi, and OTC.
The iShares Ethereum Trust ETF (ETHA) by BlackRock is an innovative investment product designed to provide investors with exposure to Ethereum, one of the leading cryptocurrencies.
The Grayscale Ethereum Trust (ETHE) by Grayscale is an investment vehicle designed to offer investors exposure to Ethereum, one of the leading cryptocurrencies by market capitalization.