Examining Ethereum ETPs after breaking 2024 record with $6.2 billion in inflows
A massive injection of capital into crypto exchange-traded products (ETPs) is shaking up the digital asset market. Especially as Ethereum-based funds shatter previous records and reveal a stark change in investor thinking. This rush of both institutional and retail cash into regulated crypto vehicles isn’t just driving a rally. Instead, it’s putting regulators on the spot and could clear the way for a new class of altcoin ETPs.
The market’s confidence became undeniable in mid-2024 when crypto ETPs saw an unprecedented flow of money. Ethereum products stole the spotlight, with weekly investments doubling old records and setting astonishing new benchmarks.
Such an influx pushed the total year-to-date money for all crypto ETPs far beyond what was seen in the entire previous year.
This level of demand is a direct endorsement of the underlying crypto assets and the safety of the ETP wrapper – A signal that the U.S Securities and Exchange Commission (SEC) can no longer easily dismiss.
BlackRock’s ETHA commands the field as investment frenzy begins
When U.S Spot Ethereum ETFs went live on 23 July 2024, the investment dams broke. The market saw daily inflows hit new heights, with one day in mid-July seeing Ethereum ETFs hoover up a staggering $726.74 million.
BlackRock’s iShares Ethereum Trust (ETHA) quickly established itself as the dominant force in this new arena. The fund consistently vacuumed up the majority of new capital, at one point absorbing $546.7 million in a single day. Its relentless streak of positive inflows has allowed it to quickly gather billions in assets under management (AUM), solidifying BlackRock’s position at the top.
Fidelity’s Ethereum Fund (FETH) has also proven to be a formidable competitor, regularly pulling in daily investments in the nine-figure range and carving out its own significant market share. The launch wasn’t entirely smooth, however. Grayscale’s legacy Ethereum Trust converted into an ETF (ETHE), triggering a large, initial exit of funds – A pattern that was expected after the spot Bitcoin ETF launches.
Investors who were previously stuck in the trust finally had a chance to cash out or switch to products with more competitive fees. In spite of Grayscale’s bleeding, the net flows into the new Ethereum ETFs were a clear victory, marking a wildly successful debut.
What’s driving the surge? Tech upgrades and a change in strategy
This newfound investor conviction isn’t purely speculative; it’s grounded in real technological progress on the Ethereum network.
- The Dencun Upgrade – Rolled out in March 2024, this upgrade fundamentally changed Ethereum’s scaling capabilities. By implementing “proto-danksharding,” it cut transaction costs on Layer-2 networks by as much as 98%, making the ecosystem cheaper and more practical for widespread use.
- A Visible Path Forward – Investors are also putting their money behind a tangible plan for the future. The Pectra upgrade, slated for 2025, is set to enhance user experience through “account abstraction” and simplify staking. This is just one step in a broader strategy that includes “The Surge” and “The Verge,” both designed to push scalability and decentralization even further.
The technical progress is feeding a new market story. Analysts are observing a clear rotation of money out of Bitcoin and into Ethereum, with ETH ETF inflows outpacing Bitcoin’s on multiple occasions.
What this means is that investors are looking beyond Bitcoin and see Ethereum’s unique potential as a productive asset that underpins the world of decentralized finance (DeFi).
Staking – The next big fight for U.S ETPs?
A key feature that could shape the future appeal of Ethereum ETPs is staking—the ability to earn a yield for helping secure the network. While many European ETPs already provide these rewards to investors, the SEC forced U.S issuers to leave the feature out at launch.
That might be about to change. A recent comment from the SEC opened the door, suggesting that some staking services might not be considered securities. That sliver of hope was enough for giants like BlackRock and Fidelity, who have already filed amended applications to include staking in their U.S. Ethereum ETFs.
If approved, the move would drastically increase the funds’ appeal and likely attract another wave of investment. Analysts think a ruling on staking could arrive by late 2025.
What ETP investors should keep in mind
Despite the excitement, putting money into Ethereum ETPs isn’t a sure bet. Investors need to weigh the downsides too.
- Fees – While competition is driving them down, management fees like Grayscale’s 2.5% on its main trust can eat into your returns over time.
- Price Mismatch – The fund’s price won’t always perfectly track the real-time price of ETH because of fees, trading costs, and market mechanics.
- No Real Ownership – You’re buying a share in a fund, not the ETH itself. That means you can’t use it for DeFi, NFTs, or other blockchain activities.
- Wild Swings – At the end of the day, it’s still crypto. The market’s notorious price volatility remains a major risk.
Is the Altcoin ETF era beginning?
The successful launches of both Bitcoin and Ethereum ETPs have established a template that could be used for other major cryptocurrencies. The whole industry is now trying to guess which altcoin gets approved next.
Asset manager VanEck already made the first move, submitting the first-ever U.S. application for a spot Solana (SOL) ETF back in June 2024. That filing, and others that followed, has fueled talk that ETPs for other large, well-established cryptocurrencies could be on the horizon.
The record-breaking investments have sent a clear signal – The wall between traditional finance and digital assets is coming down. As the market grows and rules become clearer, the crypto ETP space seems ready for major expansion, giving investors an ever-growing list of regulated choices.