1.4 billion outflows from BlackRock (BLK.US) ETHA: Value capture dilemmas in a high-interest environment

According to Woofun AI, in October 2026, Wall Street experienced significant capital changes, and the ETH ETF led by BlackRock (BLK.US) experienced large-scale redemptions. Among them, the flagship product ETHA had a net outflow of 1.42 billion US dollars in a single month, accounting for nearly 90% of the net outflow of the entire spot ETH ETF market of 1.67 billion US dollars.

This phenomenon marks a strategic adjustment of institutional capital in the allocation of Ethereum assets, rather than a simple market panic. Although BlackRock was the first institution to introduce ETH into traditional securities accounts, its counters are currently the main channel for funds to be withdrawn. This contrast reveals a deep conflict between product design and the macro environment.

The details of the leaked data need to be accurately clarified based on Farside Investors' daily records. As of October 30, the overall net outflow of US spot ETH ETFs was about US$1,607 million, and ETHA fund alone was under outflow pressure of US$1.42 billion. Of the 21 trading days, 19 showed a net outflow; only 3 days were net inflows. Glassnode's daily net outflow was recorded for 23 consecutive trading days, but Farside's daily schedule showed small inflows on October 13th, 21st, and 23rd, with differences between the two scales.

The clarification of this data is critical, as it shows that the withdrawal of funds was not an uninterrupted one-sided decline, but rather a continuous outflow trend accompanied by short-term fluctuations.

When analyzing the outflow structure, it is necessary to eliminate the effects of one-time distractions. On October 6, ETHA had an outflow of US$201.9 million in a single day. This abnormal data was mainly due to a three-in-one reverse stock split operation. According to SEC documents, fractional amounts of less than one share were settled in cash, resulting in a large cash outflow from the books on the same day.

However, even after deducting the impact of that day, ETHA continued to show a net outflow on subsequent trading days such as October 7, 12, 14, 19, and 22. This shows that a single technical factor in stock splitting cannot explain the redemption wave throughout the month, and the withdrawal of funds has continuous and structural characteristics.

Who is selling and where the capital is going is the key to analyzing this flow. The title often says “BlackRock is selling ETH,” but this is a misleading statement. ETHA's share is held by investors, and the redemption is initiated by fund holders, including institutional investors and authorized participants, rather than BlackRock actively selling assets. After redemption, the corresponding ETH may be sold or processed by authorized participants, thereby affecting the spot market.

According to data compiled by Woofun AI, Fidelity's net inflow of FETH over the same period was about 36 million US dollars, Grayscale's ETHE outflow was about 119 million US dollars, and BlackRock's own ETHB outflow was about 52.3 million US dollars.

This differentiation shows that investors are not abandoning ETH, but switching between different products. Due to a quarterly delay in the disclosure of 13F positions, the exact final destination of the funds still requires subsequent data verification.

The pressure of high interest rates in the macro environment has intensified asset rotation. Wintermute's analysis on October 12 indicates that the minutes of the Federal Reserve meeting suggest that interest rates may continue to be raised at the end of the year, causing the 10-year US Treasury yield to remain high, while the S&P 500 index reached a record high.

In this context, cashless assets are clearly under pressure. In the week, the US spot BTC ETF had outflows of around $6.8 billion, and the ETH ETF had outflows of around $5.4 billion. On the price side, the media reported that ETH fell 9.7% from around $2,700 at the end of September to $2,438 on October 21. Falling prices and increased redemptions form a negative feedback cycle, but the macro-high interest rate environment is undoubtedly the core variable driving up opportunity costs, leaving unprofitable assets at a disadvantage in institutional allocation.

ETHA's product flaw is that it only provides price exposure and doesn't include staking rewards. For holders, this is similar to buying a ticket that only allows entry and viewing without dividend rights. In a period of low interest rates, the disadvantages of this structure are not obvious; however, in an environment of high interest rates, treasury bonds and monetary funds provide stable interest, and the opportunity cost of ETHA rises significantly. Due to its large scale and good liquidity, ETHA is the preferred tool for institutions to adjust ETH positions. In contrast, although Grayscale's ETHE provides collateral, its high 2.5% management fee forms a historical burden and limits its appeal. Therefore, high macro interest rates are wind. ETHA's unprofitable structure is a leak point, and when the wind is strong, leaks naturally enter water.

BlackRock is trying to make up for this shortcoming by launching a new product, ETHB. On March 12, 2026, iShares Staked Ethereum Trust (code ETHB) was listed on Nasdaq. The mechanism is to use 70% to 95% of ETH for staking and distribute 82% of the rewards to shareholders. The remaining 18% is shared between BlackRock and staking service providers, and the assets are held in Coinbase Prime and Anchorage Digital under Coinbase (COIN.US). Management fees were 0.25%, and the first $2.5 billion assets were reduced to 0.12% in the first 12 months. The asset value on the day of listing was US$107 million.

Although Rex-Osprey launched similar products as early as September 2025, BlackRock's entry raised market attention. However, ETHB also experienced an outflow in October, indicating that product iterations did not immediately reverse the flow of funds.

ETHB's earnings estimates show that its competitiveness is still limited. Based on network data from the beginning of 2026, the annualized return on the pledge was about 3%. After deducting the 18% share, shareholders received about 2.5% of the return. In contrast, 10-year US Treasury yields were around 4.2% during the same period.

This means that ETHB's returns are still below the risk-free interest rate. Furthermore, the prospectus states that there is a queue for withdrawal and withdrawal from the verification node, which can take up to seven to ten days. This part of the liquidity discount further reduces its appeal. As a result, although ETHB has filled the gap of no return, it is still difficult to compete with treasury bonds in terms of absolute returns, and its persuasive power will have to wait for a downward cycle in interest rates to increase.

Ethereum's value logic faces theoretical challenges. Lin William Cong, Ye Li, and Neng Wang pointed out in the paper “Tokenomics: Dynamic Evaluation and Valuation” published in The Review of Financial Studies in 2021 that the value of tokens stems from the summation of users' transaction needs and follows the dynamic model of “the more prosperous the network, the more valuable the token”.

However, the premise of this model is that users hold tokens for transactions. After EIP-1559, basic expenses were burnt down, and inflation decreased when the network was busy. However, as the Dencun upgrade introduced blobs in 2024, the cost of L2 publishing data was reduced, and the amount of L1 burned down drastically. According to CMCC data, the amount of quarterly processing fees burned fell by 73% from US$1.1 billion in the first quarter of 2024 to US$300 million in the third quarter.

The failure of the deflationary narrative further exacerbates the value capture dilemma. By April 2026, media statistics showed that around 1,700 new ETH were issued every day, while only 560 were burned. Everstake estimated an annualized net growth rate of 0.7% to 0.8% in May. The December 2025 Fusaka upgrade set a floor price for blobs, but the results are yet to be seen. The staking reward comes from the new ETH issued by the protocol rather than external revenue, which is equivalent to the network paying security costs through additional issuance. Lin William Cong and others pointed out in the NBER working paper “The Tokenomics of Staking” (published in April 2025; earlier version at the 2023 conference) that the higher the pledge rate, the higher the subsequent excess returns, but this conclusion has not been peer-reviewed and there is controversy over beta exposure. For unstaked ETHA holders, the asset ratio was diluted by a net increase. Although the margin was less than 1%, the direction was clear.

The gap between the infrastructure boom and the value of tokens is becoming increasingly apparent. Blockworks analysis notes that despite a surge in user trading volume and stablecoin usage, and rollups are filling up blobs, L1's fee revenue is far below the level of 2021-2022. Expense capture has moved to the L2 sequencer, MEV supply chain, and application layer, and L1 has become a low margin settlement platform. According to Coin Metrics data, blob fees for the first quarter of 2025 represented only 0.07% of total costs. Although real economic activities such as stablecoin settlement and RWA run on Ethereum, institutions use it more as a low-cost settlement infrastructure rather than holding ETH as a portfolio asset. 21Shares acknowledged in its 2026 outlook that cost compression and L2 value spillover raise the threshold for translating throughput into lasting value.

The future value capture of Ethereum faces the deduction of three paths. The first is macroeconomic recovery. Falling interest rates are driving the return of risky assets. At this time, it is necessary to observe whether capital enters the market before the price. Second, product changes. Whether ETHA introduces staking or whether ETHB can attract capital in a low interest rate environment is still variable. Third, value capture continues to deteriorate. If BTC ETF funds return and ETH ETF outflows continue, the ETH to BTC exchange rate falls, the Glamsterdam upgrade date is undecided, and the Hoodi testnet upgrade is postponed on October 22, which will further reduce market patience. The $1.4 billion that disappeared from BlackRock's counter is not only a book figure, but also a serious question about whether Ethereum can capture value in the infrastructure boom.