Spot Ethereum exchange-traded funds (ETFs) traded in the United States experienced sustained outflows from late September to mid-October, which coincided with a period when the ETH/BTC ratio was relatively weak.
However, non-US capital inflows and a continued increase in staking have dampened the impact on prices, suggesting the headwinds are temporary rather than structural.
The question of whether ETF redemptions are causing Ether's underperformance relative to Bitcoin requires analyzing flow data alongside derivative positioning, staking supply sinks, and regional differences.
ETF creation and redemptions reflect the activity of authorized participants rather than direct buying and selling, and their relationship to price depends on broader market structure, including funding rates, basis spreads, and competing yield opportunities.
Evidence shows that the outflow window when derivatives positioning goes negative corresponds to weakness in ETH/BTC, but staking inflows and European buying are repeatedly absorbing US selling pressure, limiting spillover from flows to spot.
flow pattern and timing
U.S. Spot Ether ETFs have oscillated between heavy inflows in July and August and weeks-long periods of outflows in late September and mid-to-late October.
In the week ending September 26, Grayscale's ETHE saw record redemptions of around $796 million in the US as investors switched to lower-fee products or exited positions entirely.
Outflows resumed between October 23rd and 24th, with net redemptions totaling approximately $169 million across US Ether ETPs during the week ending October 27th.
These periods coincide with the decline in ETH/BTC on a weekly closing price basis, supporting the hypothesis that flows are conveying price signals.
The opposite pattern appeared in early October. The week ending October 6 brought net inflows to the United States of approximately $1.48 billion.
In a broader risk-on environment, the Ether ETF and ETH/BTC stabilized or rose. The correlation between inflows and relative strength, and outflows and relative weakness, when aggregated to weekly frequencies, persists over the period from July to October.
However, this relationship breaks down when noise occurs in the daily interval and regional or derivative factors become dominant.
Products traded on Ether exchanges outside the US complicate the story. CoinShares data shows that Germany, Switzerland and Canada absorbed Ether ETPs during the outflow from the US in mid-October, resulting in net inflows globally in a matter of weeks despite redemptions by the US.
The Hong Kong Spot Ether ETF remains small, but a second data point outside the US will be added as the market matures.
Regional differences suggest that US flows are necessary but not sufficient for price modeling, and global demand could offset domestic selling, especially if European investors view drawdowns as entry points.
Derivatives amplify flow signals
Aligned derivative positioning strengthens the relationship between ETF flows and ETH/BTC performance.
The CME Ether futures open interest rate and perpetual funding rate act as amplifiers. If the three-month annualized basis falls into negative territory and funding interest rates turn negative, price pressure from capital outflows will intensify.
Conversely, positive basis and increased funding can soften the impact of redemptions by indicating speculative demand and willingness to pay for leverage.
Open interest in Ether futures has increased through October, reflecting increased institutional investor participation in the flow cycle, according to CME Group data.
The weighted average perpetual financing rate tracked by aggregators turned negative during the outflow period in late September and turned negative again in mid-October, suggesting that long leveraged positions were being unwound as ETFs matured.
The dual pressures of spot selling due to ETF redemptions and derivative deleveraging appear to be driving the steepest period of ETH/BTC underperformance.
As basis and funding stabilize or turn positive, the link between flows and prices weakens. A surge in inflows in early October coincided with aggressive fundraising and a move to stronger footing, and ETH/BTC halted its decline despite mixed signals elsewhere in the crypto market.
The interaction term between flow direction and derivative positioning is more predictive than flows alone, consistent with prior research on Bitcoin ETFs, which finds that flows alone can explain approximately 32% of daily price fluctuations, but that their explanatory power increases when combined with leverage metrics.
Staking and Liquid Staking Tokens as a Supply Sink
The number of Ethereum Beacon Chain validators continued to grow through October, with net validator entries absorbing ETH supply that could flow to exchanges and ETF redemption baskets.
Liquid staking token protocols such as Lido’s stETH, Coinbase’s cbETH, and Rocket Pool’s rETH also recorded increased supply during the outflow period, indicating continued organic staking demand independent of ETF activity.
To quantify the offset, we need to compare the weekly change in staked ETH and LST outstanding amounts to weekly ETF net flows.
Beacon Chain data shows validator additions worth tens of thousands of ETH per week from September to October, with LST supply growth recording a similar scale.
In total, staking sinks often matched or exceeded weekly US ETF outflows, suggesting that redemptions removed ETH from the exchange traded wrapper without flooding the spot market as staking absorbed the released supply.
Tokenized U.S. Treasuries, which offer on-chain yields of 4-5%, are a contender for capital that could be allocated to ETH or Ether ETFs.
Real World Assets Protocol reports tokenized government bond supply ranging from $5.5 billion to $8.6 billion by 2025, providing a risk-free interest rate alternative that can siphon off inflows during periods when total Ether returns lag short-term interest rates.
Competition will be fiercest among institutional investors, especially when ETH volatility increases or the ETH/BTC ratio stagnates, comparing Ether ETFs and tokenized money market products.
Measuring the relationship between flows and price requires weekly aggregation to smooth out intraday noise and reconciliation with the weekly closing price of ETH/BTC to understand relative performance.
During the period from July to October, the correlation between weekly ETF net flows and weekly ETH/BTC returns is positive. However, the coefficients differ depending on whether differential positioning and regional flows are included as controls.
Adding an interaction term for ground state and funding direction improves the fit and confirms that flows are most important when derivatives are matched.
ETF creation and redemptions reflect the activities of authorized participants in response to premium/discount trends and end investor orders, rather than direct market making.
Daily flowprints are subject to revision, and issuer-level differences in fee and tax lot structures introduce noise into the aggregate series.
This analysis also assumes that flows are converted to spot buys and sells. This holds true if an authorized participant hedges the generation/redemption basket in the spot market, but breaks down if the hedging is done through derivatives or over-the-counter desks.
The lag between reported flows and actual market impact can range from hours to days, complicating intraday correlation testing and supporting weekly frequency as an appropriate unit of analysis.
What to watch next
ETF flows will continue to show changes in marginal demand, but their forecasts will depend on confirmation of signals from derivatives and regional data.
Weekly monitoring should track US net flows, non-US ETP direction, weighted perpetual funding on a 3-month basis, and validator queue depth.
The headwinds become even stronger when capital outflows from the U.S. are combined with negative basis, negative funding, and flat staking growth. If inflows from Europe or Canada offset US redemptions, or if staking absorbs the released supply, the impact on prices will fade.
Catalysts that could reverse the flow regime include upgrades to the Ethereum protocol that impact the economics of staking, changes to the fee structure of US ETFs that reduce ETHE's cost disadvantage, or macro shifts that compress Treasury yields and reduce RWA competition.
The relationship between flows and ETH/BTC also depends on the dynamics of Bitcoin's own ETF. If Bitcoin ETFs receive large inflows and Ether ETFs face redemption, the relative performance decline will become even more severe.
Tracking both asset classes in parallel provides the most accurate reading of whether Ether-specific factors or broader crypto sentiment is driving the ratio.
If derivatives positioning and regional flows match, US Spot Ether ETF outflows are consistent with ETH/BTC declines, but increased staking and purchases from outside the US are repeatedly absorbing redemptions, limiting spot price transmission.
Headwinds are real while base and funds are negative and outflows are concentrated, but they are temporary rather than structural.
Flows are most important not as an independent factor driving Ether's relative performance, but as a risk indicator that corroborates or contradicts signals from derivatives, staking, and cross-border demand.
