Ethereum spot ETFs have just broken a historic record with $726 million in net inflows in a single day. After a slow start, these products are finally winning over institutional investors.
Is it finally time for Ethereum?
Launched in January 2024, Bitcoin spot ETFs surprised the financial world by achieving the best start in history for an ETF. More recently, IBIT became the most profitable ETF of BlackRock, the world’s largest asset manager. To date, these ETFs have attracted nearly $54 billion in net inflows. Spot Ethereum ETFs, meanwhile, have had a more difficult start. After recording a negative net balance for nearly six months, they have been more convincing in recent weeks. They now have a total of $6.5 billion in net inflows.
Against a backdrop of more accommodative monetary policy, encouraging investors to reposition themselves in riskier assets, and with the regulatory framework surrounding cryptocurrencies also tending to ease in the US, it would appear that the time is ripe for Ether to take center stage once again.
On Wednesday, July 16, Ethereum spot ETFs recorded a net inflow of $726 million.
These ETFs have never before recorded such volumes: the previous record was set on December 5, 2024, with $428 million in net inflows.
With two days left in the week, Ether-backed ETFs have accumulated $1.18 billion in inflows, bringing the monthly total for July to $2.27 billion, another all-time high.
By comparison, Bitcoin spot ETFs posted higher volumes, with $800 million recorded yesterday alone. However, this figure remains below their multiple records, which regularly exceed $1 billion. For the current week, net inflows reached $1.5 billion for Bitcoin ETFs.
However, relative to its market capitalization, the performance of Ethereum ETFs is even more remarkable. With a total market capitalization of around $400 billion, Ether is 5.9 times smaller than Bitcoin, which has a market capitalization of $2.35 trillion.
The downside of spot Ethereum ETFs…
Although these inflows are good news for the potential continued appreciation of Ether, spot Ethereum ETFs actually pose a growing threat to the neutrality of the blockchain consensus.
Since 2021, Ethereum has been based on a Proof of Stake (PoS) mechanism, which gives validation power to Ether holders who stake their funds. They risk losing some or all of their assets in the event of malicious behavior.
However, spot Ethereum ETFs promote a growing concentration of Ether in the hands of a few large traditional financial players, delegating to them the power associated with these funds. If this concentration were to exceed 50% of staked Ether, these entities could then exercise censorship power, thereby compromising the integrity of on-chain activities.
Although issuers cannot yet legally stake their Ether, these ETFs hold 4.85 million Ether, representing the equivalent of 13% of all Ether currently staked.
Adding the shares held by exchange platforms such as Binance (8.1%) and Coinbase (7.1%), the latter also acting as custodian of Ether for ETFs, the risk of a gradual centralization of consensus becomes a concern for the future of the network’s decentralization.
