ETH ETF Flows Outperform BTC as Institutional Players Eye 'Basis Trade' - BeInCrypto

In the first week of February, U.S Spot Ethereum ETFs noted some remarkable performances and logged more inflows than their Bitcoin ETFs counterparts.

U.S. Spot Ethereum ETFs logged more inflows than their Bitcoin ETFs counterparts in the first week of February, with ETH ETFs seeing $420 million in inflows compared to $173 million for BTC ETFs, as per data tracked by SoSo Value and Farside Investors.

This trend could indicate that large players entered the market to capitalize on the discounted window offered by the ETH de-leveraging event observed earlier in the week, according to some.

On the other hand, Coinbase analysts led by David Han and David Duong attributed the outperformance in ETH ETF flows primarily to institutional players eyeing the ETH ‘basis trade.’

CME ETH basis trade, a type of arbitrage play, involves buying ETH in the Spot market and shorting it on the Futures side to pocket the difference (yield or basis). This strategy is commonly employed by institutions in both ETH and BTC markets.

However, analysts Han and Duong highlighted that the CME ETH basis trade had a higher yield than BTC this week, suggesting that most large players bought Spot ETH ETF and shorted CME Futures to enter ETH. They stated:

“It’s notable that the CME ETH basis trade has continued to return higher annualized yields compared to the CME BTC basis trade over the past week. The basis trade may be another reason why we’ve seen outsized inflows to spot ETH ETFs recently.”

As evident from the attached chart, the CME ETH yield surged as high as 16%, whereas the CME BTC basis hovered around 10%. In essence, the ETH trade offered more risk-reward opportunities than BTC over the last seven trading days.

Another factor supporting this analysis is the higher inflows into ETH Futures compared to BTC since the U.S. elections in November 2024. The analysts noted that ETH Futures’ Open Interest rates (OI) increased from 354K ETH to 1.13M ETH by early February 2025.

In contrast, CME BTC Futures showed stagnant inflows during the same period. Han and Duong added:

“CME BTC futures have also not seen a comparable open interest increase, with CME open interest remaining mostly unchanged (173K BTC on November 1, 2024 to 169K BTC on February 6, 2025).”

Lastly, the analysts warned that ETH’s price price might be capped in the short term due to negative funding rates and strong competition from Solana.