Ethereum ETFs hit record-low AUM as outflows top $1.1 billion in seven weeks

Paired with lowered volumes, spot Ethereum ETF assets under management (AUM) have plummeted to $4.57 billion as of April 18, marking an all-time low for these registered products since their inception. The ETFs have experienced seven consecutive weeks of net outflows, with a staggering $1.1 billion withdrawn during this period. 

Grayscale's ETHE has been a significant source of the outflows, with investors likely deterred by its 2.5% management fee compared to BlackRock's more competitive 0.25% fee structure. Like its Bitcoin counterpart, GBTC, ETHE also faced significant redemptions as investors migrated to lower-cost alternatives following the expiration of mandatory lock-in periods. The fee differential creates significant drag for long-term holders, especially in a price-sensitive market environment.

The ETH ETF performance stands in stark contrast to Bitcoin ETFs, which have managed to maintain a stronger grip on AUM despite market volatility. While BTC ETFs benefited from clear "digital gold" narratives and better institutional understanding, ETH's more complex value proposition as a network token may be contributing to investor hesitancy. The U.S. Securities and Exchange Commission's cautious stance on staking for ETH ETFs has also removed a key yield component that many investors find attractive in the native token.

A growing pipeline of new crypto ETF filings for tokens like SOL, XRP and LTC could further fragment institutional capital allocation. With each new product launch, the crypto ETF market risks dilution, potentially spreading institutional interest too thin across multiple products. This proliferation might lead to a situation where none of the alt-token ETFs achieve critical mass in terms of AUM, making them less attractive for institutional portfolio allocation.

This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry's most thought-provoking trends.