Ethereum is trading 60% below its record price. Here’s why Ether ETFs could ‘outperform’ Bitcoin funds

Ethereum exchange-traded funds are lagging behind their Bitcoin counterparts.

The lack of trading action shows in the second biggest cryptocurrency’s price. But Ether could turn a leaf — and even end up outperforming Bitcoin, at least in the short-term, analysts say.

“Volumes continue to grow quickly, and I do think once crypto sentiment stabilises, Ethereum could outperform [Bitcoin] in the shorter run as price catches up to ‘better’ fundamentals,” Luke Nolan, analyst at CoinShares, told DL News.

He points to how Ethereum is at the core of the stablecoin hype, which Standard Chartered expects will send stablecoins to a total value of $2 trillion, a five-fold increase from today’s value, by 2028.

“Ethereum hosts over $160 billion in stablecoin market cap, roughly 50% of all stablecoins,” Nolan said.

Others point to how Ethereum is also at the centre of the tokenisation hype, which promises to put regular assets like stocks and bonds onchain.

Despite the buzz, Ethereum is now 60% below its August record of $4,946, according to CoinGecko data. Its price dip comes as every major coin takes a hit. Ethereum ETFs this year have slogged behind Bitcoin and the coin remains more “exposed” to geopolitical risk than Bitcoin, experts said.

Lackluster flows

Ethereum ETF trading action last year was hot. Consistent flows — in and out of the new products — showed that investors were enthusiastic about the coin.

But this year, investors have been less excited.

“It’s not been pretty,” James Seyyfart, research analyst at Bloomberg Intelligence, told DL News. 

“They haven’t rebounded the way Bitcoin has, at least from a flow perspective,” he added. “People have already started buying the dip in Bitcoin — but not so much with Ethereum on the ETF side.”

Nolan added that money started going back into the funds again at the beginning of March, but figures from Farside Investors show that speculators have pulled money out of the funds every day since March 18.

Data from CoinShares shows that Ethereum ETFs collectively manage $13.6 billion in assets. Bitcoin ETFs, by comparison, manage over $85 billion and have continued to steal the show even as war in the Middle East rages.

Stablecoin and tokenisation mania

But it’s not all doom and gloom, analysts told DL News. 

Stablecoins are not only the biggest crypto application but the most-talked about: banks and the crypto industry are currently hashing out new regulation that will decide whether or not investors will receive yield on the tokens.

Ethereum is the crypto network on which most stablecoins run. Tokenisation is also going mainstream, with The EU’s central bank talking about the industry.

And when investors “connect the dots”, money will hit the ETFs, Ric Edelman, founder of Edelman Financial Engines, told DL News. 

“Everybody is very happily talking about the two major innovations in crypto of late, and that’s stablecoins and tokenisation,” Edelman said.

“That’s very bullish for Ethereum.”

Investors also might be waiting on new crypto legislation to pass: when the Clarity Act finally reaches a conclusion, added Nolan, ETF flows for Ethereum could pick up.

“Overall flows tend to follow price rather than vice versa, so if price action becomes materially more constructive, flows probably come back strongly,” he said.

To be sure, the Clarity Act, the landmark crypto markets bill, has been stuck in a legislative limbo for several months as lawmakers, crypto companies and banks duke it out in the hallways of Capitol Hill. Some are even losing faith in their ability to get the Clarity Act signed into law before the midterms this year.

Ethereum’s bright spot 

BlackRock’s new ETF,  iShares Staked Ethereum Trust ETF, or ETHB, which launched March 12, is also a silver lining for the asset.

“ETHB has been a small bright spot,” added Seyffart. “That’s a very successful launch,” he continued, adding that the fund had nearly taken in over $100 million in fresh cash.

The fund gives investors exposure to Ethereum and allows them to capture staking rewards — the only ETF in the space that to do so.

And the fact that it’s been so popular in such a short space of time shows that there is demand from investors for such products, which could mean others debut soon, Seyffart said.

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at mdisalvo@dlnews.com.