BlackRock’s iShares Ethereum Trust Leads with $188.4M Inflows

Spot Ether (ETH) exchange-traded funds (ETFs) in the United States have achieved a significant milestone following their first positive net flows since their launch on July 23. SoSoValue’s ETF tracking data showed that the recently launched Ether ETFs recorded a combined net investment of $104.8 million during the week starting August 5, indicating strong investor interest.

This inflow occurred despite a sharp decline in the value of Ether during the same period. ETH’s price experienced a drop of 23% since the start of August. Hence, the inflows indicate strong investor interest in these new financial products.

BlackRock’s iShares Ethereum Trust stood out among the nine funds, with $188.4 million in net inflows. This fund has accumulated over $900 million in investments in 13 trading days.

Notably, it has not experienced a single day of outflows since its launch, highlighting the strong investor confidence. In second place is Fidelity’s Ethereum Fund, which attracted $44.65 million in inflows during the same week, bringing its total assets to $342 million.

Other funds contributing to the positive net flows include Grayscale’s Mini Ethereum Trust, the VanEck Ethereum ETF, the Bitwise Ethereum ETF, and the Franklin Ethereum ETF.

Mixed Results for Other Ether ETFs

However, two ETFs, the Invesco Galaxy Ethereum ETF, and the 21Shares Core Ethereum ETF, reported zero weekly net flows. Moreover, the total trading volume for these ETFs reached $1.9 billion, pushing the total net assets under management to $7.3 billion by August 9.

These figures highlight the significant interest in Ether ETFs amid the broader market volatility. In contrast, Grayscale’s Ethereum Trust recorded an outflow of $180 million during the week.

According to data from Farside Investors, this outflow brought the overall outflows for all nine funds to $406.4 million. In addition to the trading activity, the regulatory landscape around Ether ETFs is also changing.

The NYSE American proposed a rule change to allow the listing and trading of options contracts for three Ether ETFs from Grayscale and Bitwise. This proposal could add another layer of investment opportunities and trading strategies for market participants, potentially influencing the future performance of these ETFs.

Ethereum Gas Fees Reach Five-Year Low

Meanwhile, Ethereum’s transaction costs have plummeted to a level not seen in five years, marking a significant change in the network’s usage and cost dynamics. On August 10, the median price to send a transaction on the Ethereum blockchain dropped to 1.9 gwei.

This starkly contrasts the year’s peak in March, where the median gas fee was 83.1 gwei. The drop in gas fees comes as activity on Ethereum’s main network decreases, as layer-2 solutions handle more transactions.

Layer-2 blockchains, such as Arbitrum and Taiko, have gained traction as they offer faster and cheaper transaction processing by moving most activities off the main Ethereum blockchain. However, they still use Ethereum’s layer-1 solution to ensure security and transaction validation.

This shift in transaction activity has relieved some pressure on Ethereum’s base layer, reducing gas fees. The latest Etherscan data showed that low-priority Ethereum transactions, which can take up to 10 minutes to process, were priced as low as one gwei.

This translates to about seven cents per transaction, making the Ethereum network significantly cheaper than in previous months. The reduced transaction costs could make Ethereum more accessible to users previously deterred by high fees.

Impact on Ethereum’s Economic Model

Despite the drop, concerns have been raised about the sustainability of Ethereum’s economic model, particularly its staking rewards. Martin Köppelmann, co-founder of Gnosis, noted that gas fees must be at least 23.9 gwei to fund rewards for those who validate blockchain transactions.

Without sufficient transaction fees, validators may be less incentivized to participate in the network, potentially impacting its security and stability. Ethereum’s declining gas fees are partly due to the March Dencun upgrade, which introduced nine Ethereum Improvement Proposals (EIPs).

Among these was the introduction of data blobs or proto-danksharding, aimed at reducing transaction costs on layer-2 blockchains. The upgrade has had the intended effect as layer-2 networks continue to grow in popularity and transaction volume.

In the last 30 days, layer-2 networks’ (like Base) transaction volumes far outstrip those on Ethereum’s main chain. Base alone recorded over 109 million transactions, while Ethereum’s layer-1 networks handled around 33 million.