FETH: The Ethereum Hype Has Merit

Summary Ethereum has underperformed Bitcoin significantly since the launch of spot ETH ETFs in the US, declining 22% versus Bitcoin’s 64% gain. Despite Ethereum’s lagging price action, some investors and companies, like Bit Digital, are making sizable bets on ETH over BTC. There is some merit to the recent hype surrounding ETH given stablecoin footprint, stablecoin transfer volume, and tokenized asset trends. The Fidelity Ethereum ETF is my preferred ETH-proxy due to its reasonable fee and custody self-reliance. As we approach a full year with spot Ethereum ( ETH-USD ) ETFs in the United States, the price performance of the underlying asset has utterly disappointed against that of Bitcoin ( BTC-USD ). Data by YCharts In fact, since the launch of spot ETH funds in the US, Ethereum has actually declined by nearly 22% while Bitcoin has grown by close to 64% and just made yet another all time high mark just under $114k per coin. In spite of that, with the ‘Bitcoin Treasury’ narrative in the public markets getting increasingly crowded and competitive, big bets are being made on Ethereum – most notably from SharpLink Gaming ( SBET ) back in May as well as from Bit Digital ( BTBT ) more recently; the latter being a company that I hold and have covered roughly a dozen times through the years. Is the Ethereum Treasury flavor of 2025’s crypto capital raise bonanza warranted on any fundamental justification? This article covering the Fidelity Ethereum ETF ( FETH ) will aim to assess if it’s finally time to long ETH and its many proxies rather than the Bitcoin-adjacent products and equities that have done so well year to date. Year To Date Capital Flows Versus ETH Market Dominance 2025 has been good for Digital Asset investment products. The asset class is running on twelve consecutive weeks of positive net flows and is coming in at just under $19 billion in net investment demand year to date: Asset (mil$) MTD Flows YTD Flows AUM Bitcoin $719 $15,719 $164,182 Ethereum $202 $3,086 $15,864 Multi-asset -$10.7 $60 $4,103 Solana ( SOL-USD ) $21.6 $113 $1,436 XRP ( XRP-USD ) $10.6 $335 $1,409 Total $947 $18,962 $188,156 BTC Dominance 75.9% 82.9% 87.3% ETH Dominance 21.3% 16.3% 8.4% Source: CoinShares/Bloomberg, as of July 4th Ethereum’s share of this net flow is interesting. While BTC is still clearly driving the bus in the industry, ETH has started to take a larger share this year and this summer. Of the total $188.2 billion in AUM, ETH claims just an 8.4% share of the market. ETH Dominance (CoinMarketCap) This is somewhat in line with the 9% share of total digital asset market capitalization shown in the chart above. Yet, there is a clear change happening. Year to date, ETH is pulling in 16.3% of net flow and 21.3% through the first few days of July. That’s a small sample size, to be sure, but similar to the 23% share exhibited during the month of June. The point is, digital asset investors and corporate treasury stewards are increasingly betting on ETH. Why? Is There Justification For ETH Excitement? From a raw activity standpoint, Ethereum is still far from what I’d call irrational exuberance. Metrics like daily active addresses or monthly transactions show generally positive trends over the last year. That said, fees are a big part of this ecosystem, and Ethereum generated $39.1 million in monthly fees in June. While that was actually ahead of Solana for the first time since December, June fees were still well below the highs of last year and not even remotely close to the highs from the prior bull cycle. Monthly Fee Trend By Chain (Artemis) That said, Ethereum is still seeing growth in key areas. For instance, in the all-important stablecoin segment of the market, Ethereum has the largest share of any blockchain network and continues to see growth in monthly transfer volume: Monthly Ethereum Stablecoin Transfer Volume (Artemis) June marked the fourth consecutive month where Ethereum processed at least $1 trillion in stablecoin transfers. Though Base ( COIN ) actually beat Ethereum in the metric during the month, Ethereum beat Solana, Base, and Tron ( TRX-USD ) in stablecoin transfer volume in 3 of the last 4 months. Asset tokenization is an area that has been generating some headlines lately with Hester Peirce of the SEC recently insinuating that tokenized stocks are indeed still securities. Ethereum does not have a large share of the $427 million tokenized stocks market cap, but it is crushing the competition in tokenized treasuries: Tokenized Treasuries (RWA.xyz) As of article submission, the total market cap of tokenized treasury products across all blockchains is $7.5 billion. Of that number, Ethereum has a commanding 77% share of the market and is by far the largest recipient of BlackRock’s ( BLK ) Institutional Digital Liquidity Fund (BUIDL-USD) with $2.6 billion of that $2.8 billion product. My personal view is we are still in the early stages of asset tokenization. It’s something that I wrote about specifically pertaining to Ethereum exactly two years ago, and it’s terrific to see the thesis beginning to take shape. FETH Is Still A Solid Choice For ETH Exposure I wrote about the Fidelity Ethereum ETF back when it launched in 2024 and have not updated my view since. I still like this fund, and it’s my primary vector for ETH exposure at this point in time. Fund Details Ticker FETH Inception 07/22/2024 Expense Ratio 0.25% AUM $1.45B Source: Grayscale Fidelity’s ETH product is not the cheapest at 0.25%, though it is very much in line with the market. It isn’t the largest fund by AUM at $1.45 billion. But it is the only fund that self-manages the ETH assets rather than relying on Coinbase ( COIN ) for custody services. This minimizes third-party risk and potentially keeps fees lower longer term should Coinbase ever decide to raise the price on custody. Most importantly, the fund performs in line with the market. Data by YCharts I don’t see much of a downside in picking FETH over something like ETHA, despite the large AUM disparity. If anything, I think giving away a couple bps is worth the third-party risk minimization. Risks To FETH and ETH In many ways, what we’re witnessing in the market today could be a sign of very late-cycle behavior. Not just for equities but for digital assets as well. The proliferation of public companies looking to raise capital with the promise of scaling digital asset treasuries could certainly be viewed as an alarming trend. The masters of this craft over in Tysons Corner, Virginia, are actually experiencing compression in mNAV: MSTR mNAV 1yr (StrategyTracker) Strategy ( MSTR ) currently has an mNAV multiple of 1.9x. This is closer to a 1 year low than a 1 year high and perhaps an indication that the appetite for any and all equity premiums over digital asset values isn’t actually limitless after all. Just because buying Bitcoin at any price has worked so well for the MSTR, it does not mean every company that buys BTC, ETH, or SOL will be able to generate the same positive flywheel that Strategy just pulled off over the last 28 months. So if one is buying ETH under the assumption that an ETH-based Strategy-type actor will emerge and pump everyone’s bags, I wouldn’t hold my breath. Final Takeaways Despite what I view to be fairly obvious risks, longing Ethereum and products like FETH could well provide long-term gains in an environment where tokenization takes a larger share of global assets. Ethereum is the top network for stablecoins and tokenized treasuries. It’s still home to several of the top protocols in DeFi, like AAVE ( AAVE-USD ) and Uniswap ( UNI-USD ). And it could certainly benefit from taking a larger share of tokenized stocks should Ethereum prove to be the winning network as far as TradFi actors like Blackrock are concerned. Until there is a viable staking ETF in the US market, FETH is still my preferred long-ETH product for long-term investors.

Source: Seeking Alpha