In the aftermath of the recent elections, exchange-traded funds (ETFs) focused on Ethereum have notably reversed their earlier trajectory of substantial outflows, igniting investor interest that had somewhat dwindled since their initiation this past summer. According to data from SoSo Value, as of Tuesday, cumulative net inflows into spot Ethereum ETFs have shifted into the positive, registering at $94 million. By Thursday, this figure had risen to $238 million, an impressive feat considering it encapsulates the total funds these nine investment vehicles have amassed thus far.
The initial launch of spot Ethereum ETFs in July was met with tepid enthusiasm at best. Grayscale Ethereum Trust (ETHE) alone experienced a staggering $1.7 billion in outflows during its first week of trading. This period coincided with a significant dip in Ethereum’s price to as low as $3,400. Analysts pointed to the high expense ratio associated with ETHE as a major deterrent, making it a less attractive hold compared to its counterparts. This drew back just as the cryptocurrency market took a fall amidst widespread macroeconomic uncertainties and an unexpected unwinding of the yen carry trade that left global markets floundering.
“The advent of spot Ethereum ETFs couldn’t have been more inopportunely timed,” remarked Matt Mena, a research analyst at 21Shares. However, the mood has shifted dramatically post-elections, with a resurgence of optimism brewing within the sector. Investors, having temporarily retreated, marking a $3.2 million withdrawal from Ethereum ETFs on Thursday, had, in the preceding six days, committed a record $796 million to these financial products, spurred largely by electoral outcomes.
The market’s restored faith in Ethereum can be partly attributed to the election of Donald Trump, alongside a crypto-friendly vibe emanating from certain Congressional members. Such political shifts are hoped to further bolster development on the Ethereum network, enhancing its appeal. “With a regulatory environment that seems set to favor digital assets, both traditional finance institutions and retail crypto traders are now more confident in the resilience and future of cryptocurrencies,” observed Chris Yin, CEO of Plume.
Indeed, the anticipation of favorable cryptocurrency policies and regulations under the new administration is fuelling this renewed enthusiasm for Ethereum, as indicated by David Lawant, Head of Research at FalconX. He hinted that a regulatory landscape for stablecoins, for instance, would underscore one of Ethereum’s primary applications.
Moreover, the significant inflows witnessed by spot Bitcoin ETFs post-election suggest a broader interest revival across the crypto space, benefiting Ethereum ETFs through a knock-on effect among institutional and retail investors. “A spill-over effect seems at play, with investors expanding their horizons beyond Bitcoin, the only other cryptocurrency with an approved spot ETF currently being Ethereum,” Lawant elaborated. He hypothesized about a feedback loop influencing market dynamics—rising Ethereum prices could lead to increased investor allocations to its ETFs.
On Election Day, Ethereum’s price stood at approximately $2,400, reaching up to $3,400—a 41% increase—by Tuesday, although it has since corrected to around $3,100. Despite the overshadowing outflows at the launch, the inception of spot Ethereum ETFs is deemed quite successful, especially when considering other funds beyond ETHE. For instance, BlackRock’s Bitcoin ETF attracted $1.7 billion, with several others amassing $1.8 billion collectively.
“Garnering $3.5 billion in less than four months post-launch is commendably robust,” Lawant added, highlighting the positive reception and potential growth trajectory for Ethereum ETFs in the evolving financial landscape.