Gate.io 博客 Key Reasons Behind the Underperformance of Ether ETFs Compared to Bitcoin ETFs

Key Reasons Behind the Underperformance of Ether ETFs Compared to Bitcoin ETFs

10月23日 10:26

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## [TL; DR] 
<a href="/zh/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> has the first mover advantage over ETH since it was launched in 2009, six years before <a href="/zh/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>.

Many retail and institutional investors invest in bitcoin since it is a store of value that hedges against inflation.

Since the launch of bitcoin ETFs, the BTC value has increased by around 20%.

After the launch of Ethereum ETFs the value of ETH dropped by about 30%.

## Introduction 
As cryptocurrencies gain more legitimacy than before many investors are looking for opportunities to invest in them. One means in which the investors can get exposure to cryptocurrencies is through exchange traded funds (ETFs). Such investment instruments enable individuals and institutions [to invest in bitcoin](https://www.gate.io/how-to-buy/bitcoin-btc "to invest in bitcoin") and ETH through their derivatives. Spot bitcoin ETFs and ETH ETFs are the two leading crypto exchange traded funds. Today, we will make a comparison between the performance of bitcoin ETFs and Ethereum ETFs.

## Performance of Crypto ETFs: Comparison of Inflows Between Bitcoin and Ether ETFs
Whereas bitcoin ETFs were [launched in January 2024](https://www.gate.io/blog_detail/380/the-first-ever-bitcoin-etfs-is-here "launched in January 2024") Ethereum ETFs were introduced in July after the United States SEC approved them in May. So far, ETH ETFs and Bitcoin ETFs have performed differently. Upon their [launch bitcoin ETFs](https://www.gate.io/learn/articles/what-is-a-bitcoin-etf/3693 "launch bitcoin ETFs") have attracted much inflow. On the contrary, ETH ETFs have witnessed much outflows. However, some analysts have attributed ETH’s poor performance to the timing of their launch. They were all launched during quarter 3 (Q3), a period in which cryptocurrencies perform below expectation.

No doubt, the performance of ETH ETFs has been disappointing. Bitcoin, for example, recorded around $19 billion in capital inflow during the first 10 months of their inception. Currently, BTC ETFS have generated more than $61 billion funds inflow. BlackRock, Fidelity and ARK bitcoin ETFs have been leading the pack in terms of inflows. The bitcoin ETF performance is slightly different from the ETH ones which have only collectively garnered $7 billion. Even the leading ETH ETFs like the BlackRock’s ETHA have performed below expectation as they have been recording outflows for most of the time.

## Putting the Crypto ETFs into Context
It is vital to realize that ETH ETFs are underperforming while bitcoin ETFs are flourishing. The Bitcoin ETFs have already broken many records, a reason [why many investors are interested in them](https://www.gate.io/learn/articles/pros-and-cons-of-investing-in-bitcoin-etfs/2541 "why many investors are interested in them"). As an example, BlackRock and Fidelity bitcoin ETFs collected over $4.2 billion and $3.5 billion each within 30 days after their launch. They have even surpassed the performance of BlackRock’s Climate Conscious fund which generated $2.2 billion in its first month, August 2023. Despite ETH ETFs’ failure to surpass these records three of them are among the top 25 best performing ETFs for 2024. Specifically, BlackRock’s ETHE, Fidelity’s FBTC, and Bitwise’s ETHW had $1 billion, $367 million, and $239 million in assets within their first three months.

What has made the situation look so bleak is Grayscale ETHE’s disastrous performance. Since its inception, it has recorded high outflows that have created a very negative image of the ETH ETF sector. ETHE, originally launched as a Trust in 2017, did not permit the investors to redeem their shares. Therefore, the money was stuck in the shares. As a result, Grayscale converted it to an ETH ETF on 23 July which created an opportunity for the investors to redeem their shares. That is the key reason why it has recorded much outflows since its launch. At the time of the launch of the Ethereum ETFs Grayscale had around $10 billion in Ether. Although it moved some of the capital to its other fund - ether mini ETF – the ETHE valuation has recorded around $3 billion in outflows. Overall, since their inception, there has not been an improvement in the Ethereum ETF inflows.

The same scenario unfolded with Grayscale’s bitcoin ETF, GBTC. This investment instrument has had an outflow of about $20 billion since its conversion in January. Interestingly, the more-than-average performance of BlackRock and Fidelity’s spot Bitcoin ETFs have helped to enhance stability within the sector.

## Ethereum Vs. Bitcoin ETFs Performance 
Considering the above discussion many people want to find out why the bitcoin ETFs have so far outperformed the Ethereum ones. And indeed, there are several reasons for their different fortunes on the market. As an example, bitcoin ETFs have the first mover advantage and bitcoin itself has a higher valuation and a better reputation than Ether (ETH).  Let’s briefly look at the reasons why most investors favor Bitcoin ETFs over Ethereum ETFs.

Staking Yields - The Missed Opportunity in Ether ETFs:  In terms of the underlying assets there is a significant difference between ETH and bitcoin that contribute to their attractiveness on the market. Primarily, Ethereum has a staking feature that bitcoin does not have. Accordingly, staking ETH has a higher reward than holding it in any other forms, being it in derivatives. Currently, ETH investors seem to value the Ethereum staking yield more than returns from ETH derivatives such as ETFs.  The ETH staking rewards are about 3.5%. Unlike staking, ETH ETFs have a lower return and the negative impact is compounded by the management fees that range between 0.15% to 2.5%. With the ETFs there is no room for the [investors to stake the ETH](https://www.gate.io/learn/articles/how-to-stake-eth/209 "investors to stake the ETH"). This is because the U.S SEC has not allowed the ETH in custody to be staked. Thus, the refusal of the SEC to allow investors to stake their ETH has resulted in low demand for the ETFs.

Marketing Challenges for Ethereum: The other reason why many investors prefer BTC ETFs over ETH ETFs is that it is easier to market bitcoin than ETH. First, one of the key advantages is that bitcoin has a limited supply of $21 million making it a “digital gold.” It is also the number one cryptocurrency by market capitalization. Finally, it is a good hedge against inflation. As a result, people in countries with high inflation acquire and hold it in large quantities.

On the other hand, ETH has no established real world utility. Thus, it is difficult to make many people understand the essence of a decentralized, open-source smart contract platform. Also, there are no compelling reasons why ETH gains its value. Therefore, Ethereum marketing is riddled with challenges. For instance, it is very difficult to put across its value proposition to attract new investors. After all, there are many other cryptocurrencies that perform the same role as ETH. The popular Ethereum killers include <a href="/zh/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a>, <a href="/zh/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>, <a href="/zh/price/fantom-ftm" target="_blank" class="blog_inner_link">Fantom</a>, <a href="/zh/price/avalanche-avax" target="_blank" class="blog_inner_link">Avalanche</a> and <a href="/zh/price/bnb-bnb" target="_blank" class="blog_inner_link">BNB</a> chain.

## Ethereum vs. Bitcoin: Bitcoin Outperforms Ether
The other reason investors prefer Bitcoin ETFs over ETH ETFs is that bitcoin has been performing better than ETH during the current year. For example, the Ether valuation has increased by only 1% since January. However, the value of bitcoin has risen by over 42% during the same period. Of note, the bitcoin valuation has increased by about 20% since the launch of its ETFs. As of this writing, the price of bitcoin has been hovering close to its all-time high of $73,737, attained in March. Thus, with a current price of $67,865 its value is 8% lower than its ATH.

On the contrary, ETH which is trading at $2,637 is about 46% below its all-time high of $4,878. These performance disparities have positioned BTC ETFs as better investment assets than ETH ETFs. Due to the high performance of bitcoin many investors are pouring their money in its derivatives due to fear of missing out (FOMO). On the other hand, ETH's 30% price decline since the launch of the ETFs have scared investors from investing in its derivatives.

Unattractive Ether Valuation: Currently, the Ether valuation is not attractive to many investors. In fact, many traditional investors do not find the [valuation of ETH very attractive](https://www.gate.io/learn/articles/the-impact-of-the-ethereum-etf-etf-an-analysis/3473 "valuation of ETH very attractive"). First,  ETH has a market capitalization of about $290 billion which is higher than that of most banks. Second, the investors do not tell the reason why the Ether valuation is so high. As a result, many investors would invest in ETH if its valuation falls remarkably to match its contribution in the decentralized sector.

Bitcoin’s First Mover Advantage: One thing that has made bitcoin ETFs very popular is first mover advantage. Apart from the fact that bitcoin is the leading asset in the <a href="/zh/price" target="_blank" class="blog_inner_link">cryptocurrency market</a>, it was the first digital currency to come onto the market as it was launched in 2009. As one of the pioneering cryptocurrency assets many investors prefer to put their money into it. On the contrary,  Ether was launched about six years later in 2015. Since the older generation of crypto investors were first introduced to bitcoin they still hold to it as the number one digital asset. Also, the fact that bitcoin whose value was less than 1 cent in 2010 is priced above $60,000 14 years later makes it one of the preferred crypto investment assets of all time.

## Conclusion
It's unsurprising that bitcoin ETFs are performing better than Ethereum ones. First, bitcoin has the first mover advantage over ETH. Second, bitcoin has gained by more than 20% since the launch of its ETFs. On the other hand, the <a href="/zh/price/ethereum-eth" target="_blank" class="blog_inner_link">ETH price</a> dropped by around 30% since the introduction of its ETFs in July. In addition,  it is easier to market bitcoin as a store of value and a hedge against inflation than ETH, only known as a utility token for the Ethereum network.

## FAQs on Performance of ETH ETFs 
### Why have ETH ETFs underperformed compared to Bitcoin ETFs?
Bitcoin has the first-mover advantage since it was launched earlier than ETH ETFs. In the spot market Bitcoin has been performing better than Ether which has influenced the prices of their respective ETFs.
### How have Grayscale’s products affected the perception of ETH ETFs?
Since their launch the Grayscale products have been recording outflows for most of the time. Such a development resulted in negative net ETH ETF outflows which created a pessimistic sentiment towards the investment products.
### Why don’t ETH ETFs offer staking rewards?
The United States SEC has declined the ETH issuers’ application to include the staking element on the ETFs. Sadly, the absence of staking rewards has contributed to the low demand for the Ethereum ETFs.
### What makes marketing Ethereum more challenging than bitcoin?
Bitcoin is highly regarded as a store of value and a hedge against inflation. However, Ether  has no well-established use case except that it supports a decentralized, open-source smart contract platform where developers can establish their smart contracts. 
### Could the underperformance of Ether ETFs change in the future?
It is likely that the underperformance of Ether ETFs may change in the future if there is an increase in the demand for Ethereum products and services. If the value of ETH spikes in the future many investors may put their funds in Ether ETFs.

<div class="blog-details-info">
<div>Author: Mashell C., Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

TL_ DR

Introduction

Performance of Crypto ETFs: Comparison of Inflows Between Bitcoin and Ether ETFs

Putting the Crypto ETFs into Context

Ethereum Vs. Bitcoin ETFs Performance

Ethereum vs. Bitcoin: Bitcoin Outperforms Ether

Conclusion

FAQs on Performance of ETH ETFs

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Key Reasons Behind the Underperformance of Ether ETFs Compared to Bitcoin ETFs

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