The tides are turning for Ethereum’s ETF products as expected. Outflows are slowing down, producing a small net inflow for all funds taken together.
Ethereum ETF as a whole marked net inflows for the first time since the products started trading. While separate fund producers showed predominant inflows, the market as a whole was watched as a demand factor for ETH tokens.
The selling mostly originated from the ETHE fund by Grayscale, which existed as an OTC-traded product before transforming into an ETF. The latest net inflow arrived after ETHE shares saw a trend reversal, with much lower daily selling.
As an encouraging sign, ETHE selling has been slowing down every day since the ETF launch.
The behavior of funds is not helping the ETH price in the short term. After the latest inflows, ETH still slid to $3,188.63, in line with the market-wide correction. ETH faced pressure after the US Fed decided to hold the 5.25-5.5% interest rate without a change, disappointing the markets that expected a 0.25% cut.
At the same time, ETHE also stepped back, to a price of $27.60 per share, the equivalent of $2,760 per ETH. ETHE has been trading at a discount to ETH markets for months, as mainstream investors are more reluctant to buy the shares.
The recent inflow into Ethereum ETFs is still at an early stage, but is already generating speculations of a possible turnover from Bitcoin ETFs.
$ETH ETFs
Net flows today = $33.6m pic.twitter.com/99zIQR77P2
— #333kByJuly2025 (@CarpeNoctom) July 31, 2024
Grayscale’s ETHE seen as a main source of selling pressure
Grayscale has shown it uses the ETF launch as a way to divest its sizable ETH wallet. The Grayscale balance is down to 2.5M tokens, with aggressive selling in the past month of more than 3M tokens.
ETH markets are still largely able to absorb the selling, which produced a smaller than expected price slide. At the same time, ETH is still in consolidation, and inflows to the fund are still not showing enthusiasm.
The current pattern of Grayscale selling is also creating a redistribution of influence among ETF issuers. The most aggressive buying and early market share is coming from BlackRock. In a single day, BlackRock’s fund almost absorbed the Grayscale selling, adding $119M in inflows.
ETHE still accounts for 76% of all Ethereum-based shares, but BlackRock expanded its presence to 6.9%. The share of Bitwise also grew above 3%.
Is ETH ready for a rally?
The influence of ETF buying may answer the question whether ETH has finished the consolidation. The prevailing narrative suggests ETH may try to revisit $4,000, then rally to between $8,000 and $10,000 by the end of the year, driven by ETF buying.
In the current week, the ETH price has moved downward, a direction that may liquidate long positions.
$ETH. 1 week liquidations heatmap. There is quite a lot of liquidity sitting not far below today's daily low of $3,211. It would be interesting to see if price revisits the $3,200 area or below in a long squeeze.
If so, it would certainly present an opportunity for those wishing… pic.twitter.com/sPoedNomyL— OldBlokeCrypto (@OldBlokeCrypto) July 31, 2024
Long liquidations prevailed, reaching around 5X the value of short liquidations. ETH also has a layer of liquidity on short positions above $3,400, which may be the first reason for a short-term rally.
ETH has also behaved as a range-bound utility token for years. The asset has not repeated previous all-time highs since 2021. During that time, the holding profile of ETH also changed deeply. On one hand, less ETH is now needed for fees due to network updates. But more ETH flows into passive income contracts, especially the Beacon chain staking contract.
Besides Grayscale, ETH has no other significant sources of sellers. Seized ETH is held in smaller wallets. Other big holders, such as ICO funds and even hackers, tend to recycle the ETH within the ecosystem. In the past month, more than 80K ETH left exchanges, with whales making acquisitions in preparation of a potential price breakout.
In the past two years, more than 15M ETH moved through liquid staking. A total of 48.8M ETH is locked into the Beacon contract. Those token lockups still have a much more significant effect compared to ETFs. However, the ETF interest is also used to gauge sentiment and the potential for mainstream allocations.
Cryptopolitan reporting by Hristina Vasileva
