Institutional flows are quietly rewriting the ETH vs. BTC playbook: at today’s pace, the share of ETH held in ETFs is projected to overtake BTC by September 2025. Current totals show BTC ETFs holding about 6.38% of supply while ETH ETFs sit near 5.08%—but the acceleration in ETH inflows suggests a turning point that could reshape liquidity, volatility, and cross-asset positioning across majors.

What’s Happening

A widely watched dataset from a Dragonfly analyst indicates that, at the current run-rate of creations, the percentage of ETH absorbed by ETFs will exceed BTC’s share by September 2025. This is not just headline math—steady creations reduce circulating float and can reinforce trend persistence. With BTC ETFs already a major supply sink, the relative catch-up in ETH is the development traders should watch next.

Why It Matters To Traders

ETF demand is a powerful, rules-based buyer that can: - Compress free float and amplify moves during risk-on periods. - Shift relative performance in the ETH/BTC pair as allocations rebalance. - Create reflexivity: rising prices attract inflows, which reduce float, which support prices. For ETH, the combination of ETF demand, staking lockup, and fee burns can tighten liquid supply faster than many models assume. For BTC, the halving has already constrained issuance, but a slower growth in ETF share could tilt incremental flows toward ETH on a relative basis.

Key Risks To This Thesis

- Regulatory or operational shocks: creations/redemptions can pause or slow, reversing inflows. - Macro regime shifts: higher real yields can drain risk appetite and trigger outflows. - Fee wars and product dispersion: flows fragment across issuers, muting net impact. - Correlation risk: broad crypto drawdowns can overwhelm relative flow advantages.

Actionable Setups To Consider

• Track daily ETF creations/redemptions for both assets; use 5D and 20D net-flow momentum to gauge regime. Rising 20D net inflows in ETH with flat/negative BTC flows supports an ETH/BTC relative-long bias.
• Trade the ETH/BTC ratio tactically: favor buying dips when flows and funding skew align with ETH. Set invalidation if the ratio loses its prior swing low or if 5D net flows flip negative.
• Exploit basis/funding: if ETH perp funding runs persistently positive, consider long spot + short perp carry; invert when funding turns negative. Keep position size small and funding-aware.
• Options for defined risk: call spreads in ETH into positive flow momentum; calendar spreads around known catalysts to reduce theta bleed.
• Watch liquidity stress: monitor order book depth and realized vol. Rising ETF inflows with thinning depth can amplify wicks—use staggered entries and stop placement off realized ATR.

Data To Watch Weekly

- Percentage of supply held by ETFs for both ETH and BTC. - Net creations/redemptions by issuer; fee changes that could redirect flows. - ETH/BTC trend structure (higher highs/lows) vs. flow momentum. - Funding, basis, and options skew to confirm or fade the flow narrative. - Macro calendar (CPI, FOMC) and any ETF operational notices.

Bottom Line

If the current trajectory holds, ETH could become the flow leader by percentage held in ETFs by September 2025. Trade the flows, not the headlines: let net creations, funding, and ETH/BTC structure dictate bias—and keep risk tight in case the narrative turns.

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