Amid Crypto Market Turmoil, Ethereum ETFs Flow Increases

December was a historic month for Ethereum (ETH) exchange-traded funds (ETFs) in the US, with net income reaching $2.1 billion.

This milestone made it the best performing month for Ethereum ETFs since their inception in July 2024.

Ethereum ETFs hit new monthly highs in December

According to data from SoSoValue, BlackRock Ethereum (ETH) recorded an inflow of $1.432 billion in December. Fidelity's Ethereum ETF (FETH) followed with $752 million, while VanEck's Ethereum came in third with $12 million in net income in December. While Bitwise managed a positive net inflow of up to $10 million, Grayscale recorded a negative inflow of $93 million.

On December 31, the Grayscale Ethereum Trust ETF (ETHE) continued its struggle, reporting a one-day inflow of $5.6 million and a total net inflow of $3.64 billion. Crypto researcher Trader T confirms a monthly flow of $274 million for grayscale ETHE in December.

Despite the $2.1 billion milestone, Ethereum ETFs still lag behind their Bitcoin counterparts. The BlackRock Bitcoin Spot ETF (IBIT) led the market in 2024, with an impressive $37 billion in net income, well ahead of the Fidelity Bitcoin ETF (FBTC) at $12 billion. In contrast, the BlackRock Ethereum ETF ( ETHA ) will accumulate $3.5 billion in revenue by 2024, followed by Fidelity's $1.5 billion.

While December's record-breaking performance marked much-needed growth, 2024 was a challenging year for Ethereum overall. According to a report by 10X Research, Ethereum has struggled to maintain its dominance as competing blockchains such as Solana and Tron have gained traction. Based on this, among other factors, 10X Research expressed its skepticism about Ethereum's prospects for 2025.

“The lack of significant triggers and the potential to expose authenticators are major challenges. If Ethereum fails to innovate and regain user interest, its underperformance against Bitcoin is likely to continue, the report read.

Ethereum's 2024 struggles are evident in its market performance: while Bitcoin has gained 120% in the past year, Ethereum has only gained 48%. This 70% underperformance against Bitcoin has raised questions about Ethereum's value proposition and the effectiveness of its subsequent improvements.

Concerns about Ethereum and the slowdown of its use

According to 10X, one of Ethereum's key selling points, staking, has also faced criticism. With a 28% share of all ETH, many argue that Ethereum has become a passive income vehicle rather than an actively used blockchain for DeFi and other activities. Currently around 3% yields are less attractive compared to traditional finance (TradFi) interest rates.

The Ethereum network has also struggled to regain its peak activity levels. In May 2021, weekly transactions reached around 9 million, which reached 11 million. Likewise, active weekly contacts remained in the range between 300,000 and 400,000.

“Ethereum's slowdown is in stark contrast to the growth of alternative blockchains. The chain's declining user activity and inability to develop innovations point to a deeper systemic problem, 10X Research added.

Other concerns include trends among validators. Growth in 1-month earnings confirmations has turned negative, raising concerns that some may exit the net. If this trend accelerates, it may cause further downward pressure on ETH prices.

Adding to the uncertainty is Ethereum's guaranteed price – the average price at which the entire ETH supply is moved on-chain – currently at $2,093. This is below the average deposit price for ETH at $2,383 a share, suggesting that validators may face losses if prices continue to decline.

Despite the challenges, December's earnings highlight Ethereum's enduring appeal to institutional investors. As the ETH ETF market continues to grow, Ethereum can benefit from wider adoption and improved liquidity.

ETH is down 0.37% since the opening of Wednesday's session, according to BeInCrypto data. At the time of writing, the price of Ethereum was $3,333.