Ethereum ETFs Face $113 Million Outflows on Second Day of Trading

Sentiment Status: Negative

The massive sell-offs from Grayscale’s Ethereum Trust overshadowed the positive performance of the other ETFs.

The launch of new spot Ethereum exchange-traded funds (ETFs) in the United States has experienced a significant downturn on their second trading day. These ETFs recorded net outflows of $113.3 million, with heavy selling from Grayscale's Ethereum Trust (ETHE) playing a major role.

Grayscale’s Ethereum Trust, which recently transitioned to a spot Ether fund on July 22, saw substantial sell-offs totaling $326.9 million. Originally launched in 2017, this trust allowed institutional investors to buy Ether (ETH) with a six-month lock-up period. Now, with the conversion to a spot fund, investors can sell their holdings more freely, leading to a significant amount of selling.

Despite the negative overall trend, seven of the eight spot Ether ETFs launched did manage to record net inflows on their second day. The Fidelity Ethereum Fund (FETH) and the Bitwise Ethereum ETF (BITW) were top performers, bringing in $74.5 million and $29.6 million, respectively. BlackRock’s iShares Ethereum Trust (ETHA), which had the strongest inflows on its debut, managed to pull in $17.4 million on July 24.

The massive sell-offs from Grayscale’s Ethereum Trust overshadowed the positive performance of the other ETFs. In just two days following its conversion, ETHE witnessed $811 million in outflows, indicating that investors have sold off more than 9% of the fund’s assets. This pattern is not unfamiliar, as seen with the initial performance of spot Bitcoin ETFs, which faced similar challenges due to outflows from Grayscale’s Bitcoin Trust ETF.

The impact of these outflows was felt in the broader Ethereum market. On July 25, ETH was trading at $3,172, reflecting a 6.8% drop in the 24 hours followed and 7.4% for the week. This decline in ETH's price coincided with a wider sell-off in the equities market, with the S&P 500 closing down 2.3% on July 24. Furthermore, ETH fell more sharply relative to Bitcoin, which only tumbled 2.6%. This aligns with Kaiko analyst Will Cai’s prediction that ETH’s price could be highly sensitive to inflows following the launch of the ETFs.

As the market continues to fluctuate, investors will closely watch how these new financial instruments perform and their impact on ETH's price.