Now 1 year old, US ether ETFs hit their stride

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Ether ETFs launched in the US one year ago today. Time flies.

While these products (unlike bitcoin ETFs) struggled to find consistent inflows out of the gate, this month has been a different story.

The ETH funds have attracted $3.6 billion of net capital from July 1 to July 22, Farside Investors data shows.

The segment’s $2.1 billion of inflows last week was nearly double its previous record of $1.2 billion. As CoinShares’ James Butterfill pointed out in a Monday report, the past 13 weeks of inflows represent 23% of the ETH products’ AUM.

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Institutional demand — rather than just speculative trading — has helped fuel the latest inflows. Corporate treasuries have added more than 600,000 ETH to their balance sheets this month alone, according to Blockworks Research.

Perhaps you remember that Nasdaq-listed SharpLink Gaming in May revealed its ether treasury strategy (and named Ethereum co-founder Joseph Lubin its board chair). The company’s ether holdings were 360,807 ETH as of July 20 — up 29% from a week prior.

BitMine last week said it held roughly $1 billion of ether and has a goal of acquiring and staking 5% of the overall ETH supply.

Globe 3 Capital CIO Matt Lason previously told me that ETH’s combination of scarcity, deflation and yield makes it an ideal asset for a treasury strategy. SharpLink’s ETH staking rewards rose to 567 ETH since it launched the strategy on June 2.

Bitwise CIO Matt Hougan highlighted in a Tuesday memo that ETPs and public companies have combined to buy 2.83 million ETH (worth ~$10 billion today) since mid-May. That’s 32x the increase in ETH’s supply over that span, he said.

So it’s not surprising that ETH’s price has jumped about 60% over the last month.

Because we mentioned staking before, we should note that various asset managers have filed with the SEC to allow their ether ETFs to stake a portion of the underlying holdings. BlackRock joined that movement last week, and the world’s largest asset manager typically gets what it wants from the SEC — perhaps because of clout, or knowing when the regulator is ready to approve its proposals. Maybe both.

SEC Commissioner Hester Peirce asked for patience in the SEC greenlighting modifications such as staking and in-kind creations and redemptions. Still, a number of segment observers expect those approvals are imminent.

Investors remain underweight ether ETFs, Hougan wrote in his memo. While ETH has a market cap that’s roughly 20% of bitcoin’s, ETH ETPs have just 12% of the assets that BTC products do.

“With all the excitement surrounding stablecoins and tokenization — which are primarily built on Ethereum — we think that will change, and that we’ll see billions in flows in the next few months,” Hougan added.