Bitcoin ETFs continue to hold the spotlight amongst digital assets, with ethereum ETFs a growing beneficiary of investor attention. Recent research from CoinShares demonstrated the current overlap between bitcoin and ethereum ETF institutional holdings, with some surprising findings.
CoinShares reviewed the most recent round of 13F filings. The firm found that 92% of the AUM in ETH ETFs belonged to institutional investors also holding bitcoin ETFs. On the flipside, just 24% of bitcoin ETF 13F filers held ethereum ETFs as well.
“Nearly all professional ETH ETF adoption is coming from the same firms already deeply exposed to Bitcoin ETFs,” explained Matthew Kimmel, digital asset analyst for CoinShares.
Notably, 61% of all bitcoin ETF filing AUM belonged to companies invested in both cryptocurrencies. “The result is that the upper echelon of BTC allocators form a tightly clustered group that hold a very significant chunk of the ETH ownership base,” Kimmel noted.
A Breakdown of Institutional Investment in Ethereum ETFs
The investor compositional makeup for the largest of the ETH ETFs differs from BTC ETFs. Unsurprisingly, institutional investors funneled AUM into trusted names. Nearly $500 million of the $2.2 billion in BlackRock’s iShares Ethereum Trust ETF (ETHA) was attributed to institutional investors as Q1 13F filings. In comparison, the largest fund in the space at the end of Q1, the Grayscale Ethereum Trust ETF (ETHE), attracted just $149.1 million in institutional flows.
The 2x Ether ETF (ETHU) from Volatility Shares occupied the fourth spot for largest Ethereum ETF by AUM. “The prominence of this leverage ETF AUM stands out given that leveraged Bitcoin ETFs do not occupy similarly high AUM ranks,” said Kimmel. The firm attributed the trend to elevated retail investor demand for ETH ETFs. They also noted ether’s lack of a “high beta proxy” akin to MicroStrategy for bitcoin.
Overall, it creates an environment that is “structurally different from BTC,” according to Kimmel. While bitcoin and ether are both tokens of their respective blockchains, the use case for each varies greatly. Bitcoin has scarcity and is used primarily as a store of value and alternative to physical assets like gold. Ethereum is a platform used for applications like smart contracts, with ether as its native token. It’s unsurprising that ETH investing differs on a fundamental level.
As the Ethereum network continues to evolve, it may offer a compelling investment case on its own. However, institutional investor uptake of ether remains closely tied to that of bitcoin for now. “While two very different assets, with very different fundamental investment cases, ETH is finding itself as a natural extension of existing crypto strategies, not a separate bet,” Kimmel explained.
