Key Points

• U.S Spot Ethereum ETFs recorded higher inflows than Bitcoin ETFs in February’s first week.
• The trend, driven by institutional players, may be due to the opportunity in CME ETH basis trade.

In the initial week of February, Spot Ethereum ETFs in the U.S recorded impressive performances, surpassing their Bitcoin ETF counterparts.

ETH ETFs experienced inflows of $420M, while BTC ETFs only saw $173M, according to data from SoSo Value and Farside Investors.

Understanding the Trend

Some suggest that large players took advantage of the discounted window provided by the ETH de-leveraging event earlier in the week.

However, analysts from Coinbase, David Han and David Duong, explained that the surge in ETH ETF flows was mainly due to institutional players focusing on ETH ‘basis trade.’

The CME Ethereum Basis Trade

The CME ETH basis trade is an arbitrage play where institutional players purchase ETH in the Spot market and short it on the Futures side, earning the difference (yield or basis), a common practice for both ETH and BTC.

Han and Duong pointed out that the CME ETH basis trade yielded higher than BTC this week. They suggested that most large players capitalized on ETH by buying Spot ETH ETF and shorting the CME Futures.

The CME ETH yield spiked as high as 16%, while the CME BTC basis hovered around 10%. This indicates that ETH trade offered more risk-reward opportunities than BTC over the previous seven trading days.

Supporting this thesis was the increased inflows into ETH Futures, compared to BTC, since the U.S elections in November 2024. ETH Futures’ Open Interest rates (OI) soared from 354K ETH to 1.13M ETH as of early February 2025.

Conversely, CME BTC Futures recorded stagnant inflows during the same period. Han and Duong noted that the open interest in CME BTC futures remained mostly unchanged.

Despite these developments, the analysts also mentioned that ETH’s price might stay muted in the short term due to negative funding rates and strong competition from Solana.