Ethereum (ETH) exchange-traded funds (ETFs) have gained significant traction, with record daily inflows of $333 million on Friday, outpacing Bitcoin (BTC) ETFs. The surge highlights Ethereum’s growing appeal among investors, driven by a favorable outlook for decentralized finance (DeFi) and an improving regulatory environment.
Record-Breaking Inflows Push ETH ETFs Ahead
On Friday, spot-based Ethereum ETFs in the U.S. experienced their strongest daily inflows ever, marking a significant shift in investor sentiment. According to data from Farside Investors, the combined net inflows reached an impressive $332.9 million.
- BlackRock’s iShares Ethereum Trust (ETHA) attracted the majority, with $250 million in fresh funds.
- Fidelity’s Ethereum Fund (FETH) followed closely, drawing $79 million.
This performance capped off the second-best week for ETH ETFs, recording a total of $455 million in inflows, despite the shortened trading week due to the Thanksgiving holiday in the U.S.
ETH Surpasses Bitcoin in ETF Flows and Price Action
Ethereum ETFs not only outperformed Bitcoin ETFs on Friday but also showed superior inflows over the entire week. In contrast, spot Bitcoin ETFs gathered $320 million on Friday but ended the week with net outflows.
ETH’s price performance further underscored its strength:
- Weekly and Monthly Gains: Ethereum outperformed Bitcoin during both timeframes, despite trailing earlier in the year.
- Five-Month High: ETH climbed above $3,700 on Saturday, showing resilience and renewed investor confidence.
The Catch-Up Trade: Why Ethereum Is Gaining Momentum
Ethereum’s resurgence comes after months of underperformance compared to Bitcoin. Now, analysts are calling ETH the “most obvious catch-up trade of this cycle”, as noted by crypto trader Edward Morra.
Several factors are fueling this momentum:
- Improving Sentiment for DeFi: The decentralized finance space is regaining investor trust, which directly benefits Ethereum as the leading platform for DeFi applications.
- Regulatory Optimism: A warmer regulatory environment under the incoming U.S. administration is offering clarity and boosting confidence in Ethereum-based investments.
- Institutional Interest: Open interest for ETH futures on the Chicago Mercantile Exchange (CME) surged to a record high of nearly $3 billion, signaling strong demand from institutional players.
ETH-BTC Ratio: A Potential Bottom Formation
Analysts suggest that the ETH-BTC ratio could be forming a long-term bottom after trending downward for nearly three years. According to Joel Kruger, a strategist at LMAX Group, the improved outlook for Ethereum and DeFi is a critical factor driving this shift.
“The clearer regulatory path and a positive outlook for DeFi are encouraging investors to focus on Ethereum as a strong long-term opportunity,” Kruger noted in a Friday report.
Ethereum Reclaims Investor Spotlight
Ethereum’s record ETF inflows, rising institutional interest, and strong price performance signal a renewed phase of growth for the second-largest cryptocurrency. With ETH outpacing Bitcoin in inflows and outperforming on a weekly and monthly basis, it’s clear that Ethereum is positioning itself as the “catch-up trade” for this cycle.
As the regulatory landscape becomes more favorable and investor interest in DeFi increases, ETH appears poised to maintain its upward trajectory, possibly narrowing the gap with Bitcoin in the near future.
