In a stunning turn of events, spot-based ether (ETH) exchange traded funds (ETFs) have seen a surge in popularity, recording their strongest daily inflows on Friday and outpacing their bitcoin (BTC) counterparts. This shift in sentiment comes as the second-largest cryptocurrency gains momentum as a “catch-up trade” after underperforming bitcoin for much of the year.
Record-Breaking Inflows for Ether ETFs
According to data compiled by Farside Investors, the nine spot ethereum ETFs in the U.S. booked a combined $332.9 million in net inflows during Friday’s shortened trading session. Leading the charge were BlackRock’s iShares Ethereum Trust (ETHA) and Fidelity Ethereum Fund (FETH), attracting $250 million and $79 million in fresh funds, respectively.
This marked the fifth consecutive session with net inflows for the group and concluded the second strongest week, with $455 million in net inflows, per SoSoValue data. Notably, ether ETFs outpaced flows into their spot bitcoin counterparts, which gathered $320 million inflows on Friday but suffered net outflows during the week.
Ether’s Resurgence and the DeFi Revival
After falling out of investors’ favor and lagging behind bitcoin in price action and ETF flows for much of the year, ether has enjoyed a resurgence recently. The election victory of Donald Trump has rejuvenated interest in altcoins and decentralized finance (DeFi) applications, which are primarily built on the Ethereum blockchain.
Along with strong ETF inflows, open interest for ether futures on the institutional-focused Chicago Mercantile Exchange (CME) surged to all-time records of nearly $3 billion, underscoring the improving sentiment towards the asset.
ETH is the most obvious catch-up trade of this cycle.
Edward Morra, crypto trader
Ethereum’s Price Outperformance and Potential Bottom Formation
While bitcoin spent the week consolidating below $100,000, ether showed relative strength, hitting a five-month high above $3,700 on Saturday. ETH outperformed BTC on both a weekly and monthly basis, although it still lags year-on-year.
Some analysts believe the ETH-BTC ratio may be forming a major bottom after trending down for about three years. Joel Kruger, market strategist at LMAX Group, attributes this shift in sentiment to the improved outlook for the DeFi space and a warmer regulatory climate expected under the incoming U.S. administration.
We believe the improved outlook for the DeFi space—warmer regulatory climate with incoming US administration—is a main driver behind the shift in sentiment, as market participants can now see a clearer path towards investment in Ethereum.
Joel Kruger, market strategist at LMAX Group
Looking Ahead: Ethereum’s Potential and Challenges
As the Ethereum network prepares for its highly anticipated Shanghai upgrade, which will enable staked ETH withdrawals, the bullish sentiment around ether may continue to build. However, challenges remain, such as scalability issues and competition from rival layer-1 blockchains.
Despite these hurdles, many investors and analysts remain optimistic about Ethereum’s long-term prospects. The network’s dominance in the DeFi and NFT spaces, combined with its ongoing development efforts, positions it well for future growth.
As the cryptocurrency market continues to evolve, the battle between bitcoin and ether for investor attention and capital will likely remain a key narrative. For now, it appears that ether is having its moment in the spotlight, with record ETF inflows and a strengthening price performance signaling a potential shift in market dynamics.
