A team of analysts led by J.P. Morgan Managing Director Nikolaos Panigirtzoglou noted in a report on Wednesday that the Ethereum ETF attracted a record $5.4 billion in inflows in July, matching the inflow scale of Bitcoin ETFs for that month. Analysts stated that since August, there has been slight capital outflow from spot Bitcoin ETFs, while spot Ethereum ETFs continue to attract capital inflows.
Especially since the U.S. passed the GENIUS Act (stablecoin-related legislation) in July, and investors expect another landmark cryptocurrency market structure bill to be introduced in September, Ethereum's performance has consistently outperformed Bitcoin.
Four major driving factors
J.P. Morgan analysts highlighted four major factors contributing to Ethereum's recent outperformance.
First, Ethereum ETH staking
The market expects the U.S. Securities and Exchange Commission (SEC) to approve the staking feature for spot Ethereum ETFs, which will allow asset management companies to generate staking returns for investors without requiring them to meet a minimum holding requirement of 32 Ethereum.
Second, corporate finance departments have begun to increase their holdings of Ethereum
About 10 publicly listed companies have included Ethereum in their balance sheets, accounting for 2.3% of the current circulating supply of Ethereum. Analysts say that some of these companies are expected to become validators to earn passive staking returns, while others may pursue returns through liquid staking and decentralized finance (DeFi) strategies.
Third, liquid staking tokens may not be considered securities.
Analysts say this alleviates institutional concerns, although related statements have yet to be codified into law.
Fourth, the SEC recently approved the physical redemption mechanism for spot Bitcoin and Ethereum ETFs.
This allows institutions to redeem ETF shares directly with cryptocurrency instead of exchanging for cash.
J.P. Morgan analysts stated, "This brings greater efficiency, lower costs, and stronger market liquidity to these ETFs, while reducing the need for liquidation when investors redeem large amounts."
Looking ahead, analysts believe that compared to Bitcoin, Ethereum has more room for growth in ETF and corporate finance department adoption. Currently, the scale of Ethereum held by companies and institutions lags behind Bitcoin, and if the trend of adoption continues, there is further potential for capital inflow in the future.
