Global Ethereum ETPs outperform Bitcoin counterparts ahead of anticipated ETF launch in US

Global Ethereum ETH -3.94% exchange-traded products have outperformed their Bitcoin BTC -1.57% counterparts over the past week ahead of the highly-anticipated launch of spot Ethereum exchange-traded funds in the U.S.

Ethereum ETPs generated net inflows for their fourth consecutive week, totaling 16,911 ETH, according to data from K33 Research. Meanwhile, Bitcoin ETPs saw net outflows of 12,523 BTC — the third-worst week to date — primarily driven by U.S. spot Bitcoin ETF net outflows.

Over the past four weeks, global Ethereum ETPs have registered net inflows of 86,472 ETH, worth around $300 million. That mirrors a $1.25 billion spike of inflows into Bitcoin ETPs in November 2023 ahead of the launch of spot Bitcoin ETFs in the U.S., K33 analysts Vetle Lunde and David Zimmerman wrote in a Tuesday report.

Ether ETPs global net weekly flow. Image: K33 Research .

“This is another indication that U.S. spot ETH ETF inflows would reach approximately 25% the size of the U.S. spot BTC flows,” the analysts said.

When will the spot Ethereum ETFs begin trading?

The U.S. Securities and Exchange Commission approved 19b-4 forms for eight spot Ethereum ETFs from firms like BlackRock and Fidelity on May 23. However, the issuers still need to have their S-1 registration statements become effective before trading can begin, a process that could take weeks.

Last week, SEC Chair Gary Gensler estimated that the S-1 approvals for spot Ethereum ETFs could occur sometime by the end of this summer.

Meanwhile, Bloomberg ETF analysts Eric Balchunas and James Seyffart recently moved up their spot Ethereum ETF launch date estimate to July 2. “Hearing the [SEC] staff sent issuers comments on S-1s today, and they're pretty light, nothing major, asking for them back in a week. Decent chance they work to declare them effective the next week and get it off their plate before the holiday weekend,” Balchunas posted to X on Thursday.

Spot Ethereum ETF exposure vs. Bitcoin-only strategies

With the U.S. spot Ethereum ETFs potentially launching as soon as July 2, Bitwise CIO Matt Hougan outlined three reasons why investors may want to add such funds to their portfolio, alongside one reason to stay Bitcoin-only.

Bitwise launched its own spot Bitcoin ETF in the U.S. in January and is among the eight firms finalizing their S-1 registration documents with the SEC ahead of a spot Ethereum ETF launch.

In a memo to clients on Tuesday, Hougan said that diversification, alternate use cases and historical analysis provide three valid reasons why adding spot Ethereum ETF exposure made sense. 

Citing that most investors don’t own one stock, they own a basket, unless investors have a very specific view, a strategy to simply “own the market” should be the default, Hougan wrote.

“Today, the market cap for ETH, the crypto asset that powers the Ethereum blockchain, is about $420 billion. That’s about one-third the size of Bitcoin’s $1.3 trillion. The starting place should therefore be about 75% Bitcoin and 25% ETH,” he added.

While Bitcoin focuses on providing the best form of money, the Ethereum ecosystem provides additional use cases from stablecoins to decentralized finance, Hougan continued. “That makes it difficult to know exactly which applications will matter over the long term,” he said. “Adding ETH to your Bitcoin simply gives you broader exposure to what public blockchains can do.”

Hougan said the final reason to add spot Ethereum ETFs was, as he labeled it, “math.” He noted that historically, over the course of a full cycle, adding ether to a traditional "60/40" portfolio (60% stocks, 40% bonds) boosted absolute and risk-adjusted returns compared to adding bitcoin only.

The impact a 5% allocation to crypto has had on a traditional portfolio of 60% stocks and 40% bonds over the past four years, using both a Bitcoin-only and a 75% BTC/25% ETH strategy. Image: Bitwise .

However, it also made sense for some investors to remain focused on bitcoin only, according to Hougan. The Bitwise CIO said he expects bitcoin to become the dominant new form of money that emerges from crypto with the most decentralized network, the strongest regulatory footing and the largest addressable market.

“If you are investing in crypto primarily because you are concerned with the degradation of fiat currencies (including the U.S. dollar), or because you are worried about debt, deficits, and inflation, then you should stick with bitcoin,” he said.

“If you want to make a broad bet on crypto and public blockchains, you should own multiple crypto assets. If you want to make a specific bet on a new form of digital money, buy bitcoin,” Hougan concluded.