Ether ETFs Face Challenges in Securing Consistent Inflows

In early August, the cryptocurrency market experienced a significant sell-off, but July provided a brief period of positive trends following a challenging second quarter.

A report from J.P. Morgan indicated that the total cryptocurrency market capitalization closed July at approximately $2.28 trillion, reflecting a 1% increase from the previous month and a substantial 42% rise since the beginning of the year. This figure is nearly double what it was a year prior.

While trading volumes saw improvement, variations were observed in market capitalization across different tokens and cryptocurrency products. The market cap for Bitcoin rose to $1.28 trillion, marking a 3% monthly increase. In contrast, Ethereum’s market cap decreased by 6% month-over-month, falling to $388 billion, primarily due to net outflows from newly launched spot ETH ETFs in the U.S. Additional major altcoins also experienced price declines throughout July.

J.P. Morgan noted, “The total crypto market cap ended around $2.28 trillion, up 1% month-over-month, 42% year-to-date, and nearly double its value a year ago.”

The report highlighted a modest rebound in trading volumes, with average daily volumes (ADV) rising by 9% month-over-month. Both Bitcoin and Ethereum reported significant increases in their average daily volumes, with Bitcoin up 18% and Ethereum rising 23%. However, volumes related to DeFi and NFTs continued to decrease despite these gains.

J.P. Morgan stated, “July’s average daily volume (ADV) associated with the total crypto market increased by 9% month-over-month. This improvement marks the first rebound in volumes since the first quarter of 2024.”

A notable event in July was the launch of spot ETH ETFs in the U.S. Despite initial excitement, these ETFs experienced net redemptions of $484 million within the first seven trading days. The approval of these ETFs by the SEC and their performance underscored the challenges in drawing continued inflows.

According to J.P. Morgan, “We estimate that the nine U.S. spot Ether ETFs approved saw total net redemptions of -$484 million in July, which included seven trading days.”

The report also pointed out a growing interest among traditional finance asset managers in blockchain technology and tokenization projects. For instance, Hamilton Lane launched a fund on a blockchain, while Goldman Sachs plans to introduce three tokenization products by the end of the year.

“More examples of tokenization projects only further support the use case and utility of the technology,” J.P. Morgan remarked.

In the realm of Bitcoin mining, there was increased competition as the monthly average network hashrate rose by 5% in July. However, profitability fell to unprecedented lows, with miners averaging $46,000 per exahash (EH/s) in daily block reward revenue, marking the lowest figure on record.

The report concluded, “The monthly average network hashrate increased by 30 EH/s (5%) in July to 615 EH/s, signaling the first month-over-month increase in mining competition and difficulty since the halving event.”