Although Ethereum's debut on Wall Street was not smooth, analysts say the momentum of ETFs has changed after Election Day.
Ethereum ETFs are riding the momentum after the election, reversing the outflow of billions of dollars in funds when they were launched in the summer, when investor enthusiasm was dampened.
According to data from SoSo Value, the cumulative net inflow of spot Ethereum ETFs turned positive on Tuesday, reaching $94 million. This figure represents the total revenue of 9 Ethereum investment products so far, which had risen to $238 million by Thursday.
When spot Ethereum ETFs debuted in July, the initial outlook was not optimistic. According to SoSo Value data, the Grayscale Ethereum Trust (ETHE) saw an outflow of $1.7 billion in the first five trading days after listing, as Ethereum prices fell to $3,400 and funds flowed out in large quantities.
Analysts attributed the massive outflow of funds from ETHE to the relatively high expense ratio of the product, which made its holding costs higher than other products. Soon after, the cryptocurrency market plunged against the backdrop of macroeconomic turmoil and the unwinding of the yen "carry trade", catching global markets off guard.
"The launch of the spot Ethereum ETF was poorly timed," Matt Mena, research analyst at 21Shares, told Decrypt. "But now the optimistic sentiment has fully returned."
Although investors withdrew $3.2 million from spot Ethereum ETFs on Thursday, the previous six days had set records. On Election Day, investors allocated $796 million to these products, the longest and largest inflow period on record.
Mena said that after Donald Trump took office, investors seemed more confident in Ethereum, suggesting that people hope the government under the new president will support cryptocurrencies. At the same time, he said that with a new tone on Capitol Hill, pro-crypto members of Congress "should also encourage more developers to build applications on the Ethereum network".
"With a more favorable regulatory government in the US, both TradFi institutions and retail crypto traders are feeling more confident about the prospects and resilience of digital assets," Chris Yin, CEO of Plume, told Decrypt. "We're starting to see the long-awaited excitement."
David Lawant, head of research at FalconX, said that expectations of favorable crypto policies and regulations are driving excitement about Ethereum. For example, he told Decrypt that a regulatory framework for stablecoins will validate one of Ethereum's use cases.
However, since Trump's victory, spot Bitcoin ETFs have seen inflows of billions of dollars, and he told Decrypt that the recent wave of inflows to Ethereum ETFs may also be part of the spillover effect of institutional and retail investors.
"People will start looking around and seeing what else is in the industry besides Bitcoin," Lawant said. "The first thing we're likely to encounter is Ethereum, which is the only crypto asset that has been approved for a spot ETF so far."
Lawant added that a certain degree of reflexivity may affect capital flows. He said that as Ethereum prices rise, investors are more likely to focus on ETFs and may allocate funds to them.
On Election Day, the price of Ethereum was around $2,400. Although Ethereum's price had risen 41% to $3,400 as of Tuesday, it has since fallen back to around $3,100.
Lawant said that overall, the outflow of funds from ETHE has obscured the launch of spot Ethereum ETFs, but from the perspective of this fund, their launch has been quite successful. BlackRock's Bitcoin ETF alone has attracted $1.7 billion in funds, while the other seven ETFs have attracted a total of $1.8 billion.
"It's important to remember that $3.5 billion in funds is not a bad number for ETFs that were launched less than four months ago," he said.
