Ethereum ETFs have experienced a net outflow of funds, particularly highlighted by Grayscale's ETHE, despite other ETFs like BlackRock's ETHA and Fidelity's FETH seeing inflows. This negative trend raises concerns about the attractiveness of Ethereum ETFs compared to other investment options. Factors contributing to the outflows include the limited passive income opportunities compared to staking, a declining Ethereum-to-Bitcoin ratio, and Ethereum's inflationary nature. In contrast, Bitcoin ETFs have seen significant net inflows, suggesting a differing investor confidence between the two cryptocurrencies.

September has proven to be an unfortunate month for the Bitcoin [BTC] ETF market. More concerning, however, is the underperformance of Ethereum [ETH] ETFs, which have struggled since their launch.Ethereum ETF’s negative net flowAccording to the latest update from Farside Investors, the ETH ETF experienced a net outflow of $6 million on the 6th of September.While other ETFs like BlackRock’s ETHA and Fidelity’s FETH have seen inflows, Grayscale’s ETHE has faced such significant outflows that it has pushed the net flow into negative territory. This raises a pressing question: Have Ethereum ETFs failed to attract the expected interest? What’s behind this outflow streak?To understand why investors are shying away from Ethereum ETFs, it’s crucial to examine several factors. Unlike staking $ETH, which can yield a 1-5% annual percentage yield, holding an $ETH spot ETF limits this passive income opportunity. Additionally, the Ethereum-to-Bitcoin ratio has fallen 50% over the past two years, leading many former ETH users to migrate to Layer 2 solutions or alternative, more cost-effective Layer 1 blockchains. For instance, the $SOL/$ETH ratio has surged by 346%. Ethereum has also become inflationary, as it now issues more $ETH than it burns, unlike Bitcoin’s capped supply of 21 million $BTC. Recent updates, like the Proto-Danksharding upgrade, have further reduced Layer 2 transaction fees, decreasing Ethereum’s revenue.Significant outflows from Grayscale’s ETHE are raising concerns and adding to the ETF’s negative net flow.The anticipated surge in ETH’s price to $4,000 following the launch of Ethereum ETFs appears increasingly unlikely.According to the latest update from CoinMarketCap, ETH, despite a 0.66% increase, is currently trading at $2,321—significantly below expectations.Bitcoin ETF in comparisonIn contrast, the Bitcoin ETF has seen a net inflow of $16.897 billion since its launch. Despite Grayscale’s GBTC facing outflows, BlackRock’s ETF and other BTC ETFs have collectively achieved positive net inflows. While there have been occasional days of outflows, it’s only in the past two weeks that Bitcoin ETFs have faced a sustained period of continuous outflow. Thus, it remains to be seen whether the Ethereum ETF will flip from outflows to inflows, or if investors will continue to observe a persistent outflow trend. 