Why investors dumped Bitcoin ETFs and snapped up BlackRock’s Ethereum ETF instead

Even as Ethereum plummeted, savvy investors ploughed over $233 million into various spot Ether exchange-traded funds, new data shows.

BlackRock saw the most action, adding $157 million to its ETF on Monday and Tuesday.

At the same time, other investors exited various spot Bitcoin ETFs over the last two days. Net outflows from the 11 Bitcoin ETFs total roughly $317 million, according to Farside Investors.

The preference for Ethereum during the latest fire sale boils down to two key reasons, say analysts.

“This flow action is possibly related to the fact that holders of the BTC ETFs that bought in January were still in profit despite the sharp decline in price, and therefore could be taking profits,” said Michael Friedman, capital markets specialist for financial services firm 21Shares.

While some investors cashed out, Ether’s price drop was attractive to “investors taking advantage of the decline in price as an entry point,” Friedman told DL News.

Global benchmarks, including the Nasdaq Composite Index, the S&P 500 and Japan’s NIkkei, crashed on Monday. Fears of a US recession, Federal Reserve policy, and turmoil in Japanese financial markets sent investors fleeing.

Cryptocurrencies were one of the hardest-hit markets. CoinGecko data shows that the entire market dropped more than $152 billion on Monday.

Stefan Kimmel, the CEO of UAE-based crypto exchange M2, said investors bought Ether ETFs instead of Bitcoin because they expected Ether to rise more than Bitcoin after Monday’s crash.

That bet has yet to pay off. Since Monday’s collapse, Bitcoin and Ethereum have both risen 15%, according to CoinGecko.

Despite the recent differences in investor flows, James Butterfill, head of research at CoinShares, says that investors have actually been buying both ETFs.

Market observers just need to expand their time frame.

Bitcoin alone has seen inflows of about $21 billion this year, while Ethereum has seen only $760 million, he said.

“It’s all about timing: Bitcoin saw its ETF approval in the US in January, whereas Ethereum ETFs were approved in late July,” Butterfill told DL News.

Ethereum has dropped some 27% since its ETF debut on July 23.

The year-to-date picture is rosier. Since January 1, Ether rose 9%.

Liam Kelly is a DeFi correspondent at DL News. Reach out at liam@dlnews.com.