Ethereum ETF inflows outpace Bitcoin despite smaller base

Ethereum ETFs attracted more money than Bitcoin ETFs in September, despite an asset base that is only one sixth the size of Bitcoin’s. According to an analysis by Bitfinex Alpha, traders who use ETH ETF positions as collateral for CME futures largely explain that stronger relative demand. At the same time, the Bitcoin ETF market recorded an outflow of $462.7 million last week across four trading days.

In brief:

• Ethereum ETFs received $324.4 million in inflows in September, more than the $307.3 million for Bitcoin ETFs
• Traders are building positions in ETH ETFs as collateral for CME futures, which explains the relatively high demand
• Bitcoin ETFs saw $462.7 million in outflows last week across all four trading days

ETH ETF inflows larger than Bitcoin’s despite smaller size

Ethereum ETFs took in $196.9 million in net inflows last week and stand at $324.4 million this month. That is more than the $307.3 million that Bitcoin ETFs attracted over the same period, even though the total assets of ETH ETF products are only about one sixth those of Bitcoin ETFs.

Bitcoin ETFs moved in the opposite direction last week. Across all four trading days there was a net outflow of $462.7 million, temporarily turning these products from a source of institutional demand into a net seller. Strategy also reported on Monday through an official filing that it made no new Bitcoin purchases last week.

Traders use ETH ETFs as collateral for futures strategies

Bitfinex Alpha explains that the stronger inflows into Ethereum ETFs are not driven purely by direct buying interest. Traders are building positions in ETH ETFs and then using them as collateral for CME futures, while at the same time trying to earn a return through staking. Because ETH ETFs offer a higher basis yield than Bitcoin ETFs, they are more attractive for this strategy.

On the regulated derivatives market, open interest rose by 7% on 12 September, with traders expanding both long and short positions. That points to the build-up of a cash-and-carry position ahead of the Fed’s interest rate decision rather than to direct buying pressure.

ETH expected to find support around $2.432 on a pullback

On 11 September there was a sharp short squeeze in Ethereum. Around $255 million in short positions were liquidated, against $172 million in Bitcoin shorts. The fact that Ethereum was hit harder is because the short book in ETH was more overcrowded. Bitfinex notes that the jump in the Ethereum price is therefore more a consequence of that positioning than of a structural shift in demand.

For the period ahead, Bitfinex expects Ethereum to find support at the daily low of $2.432 reached on 11 September. As long as the upward movement continues, the platform expects this level to hold in the event of a pullback. According to Bitfinex, more evidence of genuine spot buying, without the driving effect of a short squeeze, is needed before there can be any question of a real shift in demand. Read more about the Ethereum price ahead of the FOMC decision and the recent outflows at Bitcoin ETFs.