Why Global Investors Ethereum ETPs Saw Largest Outflows Since 2022

• Global Ethereum investment products like ETFs saw record outflows. 
• Ethereum ETPs hit hard in Germany, Hong Kong, and others. 
• Bitcoin and multi-asset products gained last week.  

The recent approval of Spot Ethereum Exchange Traded Funds (ETFs) in the US was seen as the biggest development for Ethereum this year, with multiple analysts predicting billions in inflows. However, just days before the first launch of one such ETF, Ethereum investment products are bleeding funds.  

Ethereum Exchange Traded Products (ETPs), which include ETFs, saw record outflows last week, after several weeks of net outflows. What is worse, the cumulative outflows make them the worst-performing assets this year by that metric.

Ethereum ETPs See Third Week of Net Outflows

Despite the recent Spot ETF approval in the United States and the upcoming launch , crypto ETPs as a whole have been hit hard globally. According to a CoinShares report published on Monday, June 1, last week marked the third consecutive week of outflows, with $30 million in losses for these products. What is more, Ethereum ETFs have seen particularly big losses. 

Source: CoinShares

Ethereum-based investment products saw outflows of $61 million on their own, the largest since August 2022. Over the past two weeks, these outflows have accumulated to $119 million, positioning Ethereum as the worst-performing asset year-to-date in terms of net flows. 

This is even more striking as, in the same period, Bitcoin ETFs on their own actually saw positive inflows globally. Bitcoin ETPs attracted $10 million in new investments, as did multi-asset ETPs, with inflows of $18 million. These factors suggest a demand for stability and diversification, amid a shifting macroeconomic environment. 

Global ETP Markets React Differently to Macro Risks

Likely the main driver of ETP outflows is changing expectations in macroeconomic policies, driven by inflation risks. In particular, the US Federal Reserve, which hadn’t raised rates since July 2023, might do so this year. 

While May’s inflation figures were lower than expected, at 3.3% , they are still far above the Fed’s target rate of 2%. What is more, famous investor Rob Arnott believes rates will trend higher this year, between 3.5% and 5%. At the higher end of that range, the Fed is likely to raise rates, he warned. 

Interest rates have a major impact on crypto, as most investors treat it as a risk asset. When interest rates are higher, interest-bearing bonds give better yields, making them relatively more attractive. 

Despite that fact, there are significant differences in regional flows to ETPs. In particular, the US saw inflows across crypto ETPs, amounting to $43 million. Conversely, Germany, Hong Kong, Canada, and Switzerland experienced significant outflows of $29 million, $23 million, $14 million, and $13 million, respectively. 

The likely reason for the varied reaction is the amount of capital already allocated to ETFs. In the US, where Ethereum Spot ETFs have only been approved recently, investors are still catching up to an equilibrium level. 

Still, this suggests that the launch of Ethereum ETFs could reverse this trend, as investors in the US start getting exposure to the asset. 

On the Flipside

• Despite net ETP outflows, Ethereum has been up 80.19% year-to-date. 
• Despite inflation risks, an economic downturn might prompt the Fed to leave the rates as they are, or even cut. 

Why This Matters

Ethereum ETPs are the primary way institutions get exposure to the crypto asset. Their investments bring in a significant amount of capital in the crypto market and significantly impact the price of digital assets. 

Read more about the first US Ethereum ETF launch: 
Ethereum ETFs on Track for July 2? New Filing Fuels Confidence

Read more about new developments in DeFi: 
ChainGPT Now Supports New Solana Projects with Its IDO Pad