According to JPMorgan's latest report, Ethereum ETFs attracted a record $5.4 billion in July, matching Bitcoin ETFs for the first time. However, while Bitcoin funds saw modest outflows in August, Ethereum products continued to record steady inflows, indicating growing investor demand.

The dominance of ETH has been most evident since July, when the United States passed the GENIUS Act, creating a legal framework for stablecoins. Analysts believe expectations for another groundbreaking cryptocurrency market structure bill, expected to be announced in September, further bolster confidence.

Why Ethereum is Beating Bitcoin

JPMorgan has outlined four main reasons why Ethereum is leading:

  1. Staking potential for ETFs – Market watchers expect the SEC will eventually approve staking features for spot ETH ETFs, allowing investors to earn returns without the standard minimum of 32 ETH.

  2. Corporate Treasury Adoption – About 10 public companies currently hold Ethereum on their balance sheets, accounting for 2.3% of the circulating supply. Some companies plan to operate validators to earn staking rewards, while others are exploring liquidity staking.

    Staking involves actively participating in transaction validation (similar to mining) on a PoS-based blockchain. Users holding a mandatory minimum balance of a specific cryptocurrency can validate transactions and earn rewards. This reward is set by the network and then sent to the user's wallet.

    > Staking strategies and DeFi returns.

  3. Clarity on regulatory guidelines for staking tokens – The SEC has signaled informally that liquidity staking derivatives may not qualify as securities, easing concerns among institutions, although this stance has not yet been formalized.

  4. In-kind redemption for ETFs – The regulator's approval of in-kind redemption for both Bitcoin and Ethereum ETFs allows institutions to redeem shares directly for cryptocurrency instead of cash. Analysts say this helps reduce costs, increase efficiency, and prevent forced liquidation when withdrawing large amounts.

Room for Development

Although Bitcoin remains dominant in the portfolios of businesses and organizations, JPMorgan's research team believes Ethereum has significant room for growth. With ETF funds accelerating adoption and treasury bond funds gradually adding ETH, analysts believe this asset could see significant capital inflows in the coming months if the current growth trend continues.