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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:

• Takeaways from the first month of trading for US spot ETH ETFs.

• Fed Chair Jerome Powell spoke. Casey translates.

• The mixed economic data you might have missed this week.

One month in the books for US spot ETH ETFs

Spot ether ETFs hit the US market one month ago today, and the category’s net flows remain in the red. But perhaps that’s not the whole story.

Thursday’s market close marked 23 trading days in the books for these funds. Some notable stats during that span (courtesy of Farside Investors data) include:

• Days of net inflows: 8

• Days of net outflows: 15

• Total flows: -$459 million

• Highest inflows: iShares Ethereum Trust (ETHA), +$1 billion

• Highest outflows: Grayscale Ethereum Trust (ETHE), -$2.5 billion

Let’s compare those with figures from the first 23 trading days for US spot bitcoin ETFs:

• Days of net inflows: 17

• Days of net outflows: 6

• Total flows: +$3.9 billion

• Highest inflows: iShares Bitcoin Trust (IBIT), +$4.6 billion

• Highest outflows: Grayscale Bitcoin Trust (GBTC), -$6.55 billion

I know, I know. BTC and ETH aren’t the same. It’s unfair to compare these ETF categories. Yada yada yada.

Bitwise's Head of Research, Ryan Rasmussen, alluded to this in his remarks to me, describing the traction for the ether funds as "phenomenal" so far.

“Is it as strong as bitcoin? No,” he acknowledged. “But we never expected it to be.”

In fact, various segment observers have said they ultimately expect US spot ETH ETFs to see roughly a third of the inflows that bitcoin funds have seen ($17.6 billion so far, in seven and a half months). We will need more time to see if that plays out.

Beyond ETHE, the rest of the ether ETF segment has reeled in more than $2 billion — with BlackRock’s ETHA hitting the $1 billion net inflow milestone this week.

Trailing behind that fund are the Fidelity Ethereum Fund (FETH) and the Bitwise Ethereum ETF (ETHW), with positive flows amounting to $390 million and $311 million, respectively.

There was also strong trading volume out of the gate, Bloomberg Intelligence data showed — with the day-one volumes for ETHA and FETH beating all other recent ETF launches (when excluding the BTC funds).

Still, the narrative around bitcoin is simpler than that of ETH, 21Shares exec Federico Brokate previously told Blockworks — meaning investors (particularly institutions and advisers) are still learning about the latter asset.

Rasmussen’s colleague, Bitwise CIO Matt Hougan, warned during a March panel at Blockworks’ Digital Asset Summit that Wall Street/TradFi was still digesting BTC and may need more time than May (when the SEC approved the ether funds) before jumping into ETH.

Rasmussen said the second-largest crypto asset by market cap came up in each of his recent meetings with 15 different advisers around the Pacific Northwest.   

“They were shocked and fascinated to learn that Ethereum is a technology platform that generates cash flow and pays out a dividend-like yield to stakers,” he said. “To traditional investors, that looks and sounds just like a tech stock.”

It’s worth noting that ETH is down about 23% over the past month.

Analysts have pointed out potential pro-crypto catalysts in the coming months — such as  potential post-election regulatory clarity and lower interest rates — that may boost ETH ETF flows.

However, the outflow of assets from Grayscale’s ETHE will likely need to stop before the category's collective net flows see a sizable boost. While that product's net outflows paused for a day on Aug. 12, they have resumed in each of the eight trading days since.

Rasmussen noted: “While the journey to Ethereum is slower than we in the industry would like, it's already begun.”

Let’s see where we are in another month and go from there.

— Ben Strack

The previous support level for ETH, which is now acting as “resistance,” according to a report published this week by crypto exchange Kraken. 

ETH’s bounce-back from its low of $1,911 on Aug. 5 has been less pronounced than BTC’s retracement since hitting $49,111 that day. 

The trendline on the relative strength index (RSI) originating from the $4,090 high ETH hit on March 12 remains intact. If ETH can’t eclipse the $2,811 resistance mark on a daily closing basis, “it could face further downside pressure, potentially retesting recent lows or even moving lower,” the Kraken report notes. 

ETH’s price was $2,730 at 2 pm ET Friday — a 4.5% rise from 24 hours prior.

Blockworks Research is conducting a survey to gain insight into the institutional staking landscape. This data will help industry leaders adopt their strategies as the industry matures.

If you're an institutional staker, we want to hear from you (and if you’re new to Blockworks Research, get 20% off of our service while you’re at it!)

Fed Chair Jerome Powell, as expected, clearly signaled the central bank would cut interest rates at its next policy-setting meeting in September. 

He did not give any indication as to the size of the cut, but he assured markets the Fed is committed to preventing additional weakening in the labor market. 

“The time has come for policy to adjust,” Powell said during a keynote address at the Kansas City Fed’s annual conference in Jackson Hole. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

Equities immediately reacted well to Powell’s comments, which were largely anticipated. The Dow Jones Industrial Average gained as much as 1% in the half hour after Powell took the podium, while the S&P 500 and Nasdaq Composite indexes gained 0.7% and 0.9%, respectively. 

Bitcoin rallied as much as 2.2% before 11 am ET before paring gains, according to data from Coinbase. 

Powell reiterated that central bankers “do not seek or welcome further cooling in labor market conditions” and will therefore act accordingly by lowering interest rates in September. He expressed confidence that labor market strength could be maintained with “dialing back of policy restraint.”

“It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon,” he added. 

I’d say we are officially in pivot territory. It wasn’t that long ago that Powell seemed just fine with lowering inflation — even if that came at the cost of slowing economic growth. 

Today, though, he was extremely clear that central bankers will prioritize labor market health. Hello, dovish Powell!

— Casey Wagner

Happy Friday! After relatively mixed data in recent days, stocks were poised to close the week in the green. Here’s a recap of the latest economic developments: 

• The Bureau of Labor Statistics on Wednesday released preliminary data suggesting the economy added 818,000 fewer jobs in the 12 months ended March 2024 than were initially reported. This is almost 30% lower than originally relayed and the largest revision since 2009. The fear here is that the labor market is not as healthy as markets initially thought. But Powell insisted on Friday that central bankers do not believe “the labor market will be a source of elevated inflationary pressures anytime soon.”

• On the flip side, initial jobless claims barely rose last week, according to data released Thursday. Markets reacted well to the positive report, which showed initial claims increased by 4,000 the week ended Aug. 17. The four-week moving average is now at its lowest point in a month. 

• Another potentially troublesome data point this week was the Flash Composite PMI for August, released on Thursday. The report showed the US S&P Global Composite PMI edged lower to 54.1 — above the expected 53.5. Services PMI moved higher, however, coming in at 55.2 in August after reading 55 in July.

— Casey Wagner

Hear executive leaders from Galaxy, BlackRock, and Coinbase on what they think about the future of crypto in the US. Join us at Permissionless.

• After bitcoin’s surge above $62,000 Friday morning and subsequent drop, BTC had risen back up above $63,100 by 2 pm ET — up 4.6% from a day ago.

• In case you missed it, an adviser for Kamala Harris’s campaign (when asked about crypto) told Bloomberg News: “She’s going to support policies that ensure that emerging technologies and that sort of industry can continue to grow.” This is a step toward the type of rhetoric Exodus legal chief Veronica McGregor told Blockworks she was hoping to hear from Harris and her team.

• Also earlier this week at the Wyoming Blockchain Symposium, Sen. Tim Scott, R-S.C., signaled he would consider creating a crypto-focused subcommittee if he becomes chair of the Senate Banking Committee.