Ether ETFs struggle to attract consistent inflows - J.P. Morgan

Investing.com -- Just before the massive sell-off in early August, July offered a brief respite for the crypto market with some positive metrics after a largely negative second quarter.

According to a report from J.P. Morgan, the total cryptocurrency market capitalization ended July at around $2.28 trillion, up 1% month-over-month and 42% year-to-date. This figure is nearly double its value from a year ago.

While volumes improved, market cap trends varied across different tokens and crypto products. Bitcoin's market cap grew to $1.28 trillion, reflecting a 3% MoM increase. In contrast, Ethereum’s market cap contracted by 6% MoM to $388 billion, largely due to net outflows from newly launched spot ETH ETFs in the U.S. Other major altcoins like Dogecoin and Cardano also saw price declines in July.

"The total crypto market cap ended around $2.28 trillion, up 1% MoM, 42% YTD and nearly double its value of a year ago," J.P. Morgan wrote. 

The report further states that trading volumes saw a modest rebound, with average daily volumes (ADV) increasing by 9% MoM. Bitcoin and Ethereum both saw double-digit volume jumps, with Bitcoin's average daily volume up 18% and Ethereum's up 23%. However, DeFi and NFT volumes kept dropping despite these gains.

"TradingView estimates July average daily volume (ADV) associated with the total crypto market increased +9% MoM," J.P. Morgan stated. "This sequential improvement represents the first rebound in volumes since 1Q24."

One of the key events in July was the launch of spot ETH ETFs in the U.S., which, despite initial enthusiasm, saw net redemptions totaling $484 million during the first seven trading days. The SEC's approval of these ETFs and their subsequent performance highlighted the difficulties in attracting sustained inflows.

J.P. Morgan explains, "We estimate the group of the nine U.S. spot Ether ETFs approved saw -$484 million of total net redemptions in July, which included seven trading days."

The report also pointed out that traditional finance (TradFi) asset managers are increasingly engaging in blockchain technology and tokenization projects. Hamilton Lane, for example, launched a fund on the Solana blockchain, and Goldman Sachs (NYSE:GS) plans to launch three tokenization products by year-end.

"More examples of tokenization projects only further supports the use case and utility of the technology," J.P. Morgan noted.

Bitcoin mining saw increased competition with the monthly average network hashrate rising 5% in July. However, profitability dipped to all-time lows, with miners earning an average of $46,000 per exahash (EH/s) in daily block reward revenue, the lowest on record.

"The monthly average network hashrate increased 30 EH/s (5%) in July to 615 EH/s, marking the first month-over-month increase in mining competition/difficulty since the halving," the report stated.