Summary Fidelity Ethereum ETF is downgraded due to a lack of staking and extreme ETH valuation concerns. ETH network fees collapsed 86% YoY in Q4-25, driving the P/F multiple to a historic high of 3,260x. FETH lags peers in inflows; Grayscale Ethereum Mini ETF is favored for its lower fee and staking capability. Ethereum's stablecoin usage and capital flows remain strong, but success may already be priced into ETH. It has been about 6 months since I last covered the Fidelity Ethereum Fund ETF ( FETH ) for Seeking Alpha. To briefly recap my thoughts on the fund, it was my preferred spot Ethereum USD ( ETH-USD ) ETF back when it launched in July 2024. I have generally liked that Fidelity relies on self-custody for asset holdings rather than third-party providers like Coinbase Global, Inc. ( COIN ), though Fidelity has deviated from the self-custody strategy in the newer Fidelity Solana Fund ETF ( FSOL ). In this update, we'll look at Ethereum's key metrics for Q4-25 as well as capital flow considerations broadly and for FETH specifically. Ethereum Network Metrics Q4-25 was a continuation of the broad trend that we've seen for Ethereum over the last several quarters. Namely, on-chain activity is up when viewed through usage metrics like Daily Active Addresses and transactions; each of which was up by nearly 30% year-over-year. However, we continue to see what I view to be one of the most important economic numbers for the network declining. Ethereum Q4-25 Q3-25 Q4-25 YoY QoQ DAAs (000s) 400.8 516.0 509.9 27.2% -1.2% Transactions (millions) 112.1 147.3 145.2 29.5% -1.4% Fees (millions) $552.10 $125.40 $76.60 -86.1% -38.9% Source: Artemis Analytics. Fees in the quarter were down 86% year-over-year from $552 million in Q4-24 to just $76.6 million in Q4-25. The sequential decline in fees was also high at nearly 40% in a single quarter. This decline in fees took Ethereum from the top network in the public blockchain industry in Q4-24 down to the third-ranked chain by fees in Q4-25. Even though network fees have essentially collapsed over the last several years, Ethereum's stablecoin footprint continues to be terrific. Not only has the chain seen more than 89% year-over-year growth in stablecoin supply from Q4-24 to Q4-25, but the actual usage of those coins has seen tremendous growth. Stable Tx Vol Q4-25 Q3-25 Q4-25 YoY QoQ Total Market (trillions) $10.2 $15.8 $19.7 93.1% 24.7% Ethereum (trillions) $2.3 $5.0 $7.5 226.1% 50.0% ETH Share 18.40% 24.04% 27.57% 49.9% 14.7% Supply (billions) $87,100 $130,300 $164,700 89.1% 26.4% Source: Artemis Analytics. In the last three months, Ethereum settled $7.5 billion in stablecoin transaction volume. This was good for 226% year-over-year growth and 27.6% shares of the total stablecoin market. Importantly, Ethereum's share of stablecoin transaction volume also grew both year-over-year and sequentially. Digital Asset Capital Flows Capital markets are still viewing Ethereum favorably from where I sit. During the full year 2025, Ethereum saw $12.7 billion in positive net flows into investment products. This was good for just under 27% of the total asset flows in the market. That trend is generally continuing in 2026, with $553 million in year-to-date net flows giving Ethereum 23% share of capital flows. Asset (millions) YTD Flows AUM 2025 Flows Bitcoin $1,664.0 $149,776 $26,984 Ethereum $552.9 $27,543 $12,698 Multi-asset -$32.1 $6,881 -$214.0 XRP $108.1 $3,865 $3,697.0 Solana $75.8 $3,832 $3,562.0 ETH Dominance 23.0% 14.2% 26.9% Source: CoinShares, Bloomberg as of 1/16/25. Considering Ethereum's investment AUM in the digital asset space is just 14.2% share of the market, Ethereum should continue to see a bid from investors if the network can continue to scale both stablecoin supply and stablecoin usage on-chain. FETH Vs. Peers While the market demand for Ethereum products in 2026 remains strong relative to AUM share, not all the digital asset ETF providers are seeing the same success. Despite having the third largest AUM in the broad space, Fidelity's products are underperforming a broad market that has already seen $2.4 billion in net inflows to begin 2026: Provider (millions) MTD Flows YTD Flows AUM 2025 Flows iShares $1,798 $1,798 $87,477 $35,056 Grayscale $28 $28 $27,636 -$2,851 Fidelity -$126 -$126 $23,048 $2,151 Bitwise $262 $262 $8,448 $1,105 Volatility Shares -$77 -$77 $4,352 $372 Total $2,404 $2,404 $193,556 $47,153 Source: CoinShares, Bloomberg as of 1/16/25. With $126 million already coming out of Fidelity products to begin the year, this could actually get worse for the provider before it gets better, given the fact that it has been Fidelity's Bitcoin USD ( BTC-USD ) product rather than its Ethereum product that has created the outflow year to date. Fidelity's ETH product has generated a little under $23 million in positive inflows. But that inflow is lagging competing funds: Fund Expense Ratio Staking? YTD Net Flows iShares Ethereum Trust ETF ( ETHA ) 0.25% Pending $369.90 Grayscale Ethereum Mini Staking ETF ( ETH ) 0.15% Yes $137.30 Bitwise Ethereum ETF ( ETHW ) 0.20% Pending $59.90 FETH 0.25% Pending $22.60 21Shares Ethereum ETF ( TETH ) 0.21% Pending $6.60 Source: Farside. The biggest issue I see for FETH at this time is that the fund lacks staking. While it is widely expected that the SEC will eventually approve staking for FETH, among other funds, right now, Grayscale is the only provider that does indeed have staking enabled for the fund assets. In a prior article , I detailed why I liked Grayscale's Mini ETF compared to Grayscale's original Ethereum product despite the lower staking ratio. Until FETH has staking enabled, the Grayscale Ethereum Mini ETF is likely the better long-term bet due to its lower fee and staking of assets. Risks There are numerous risks to consider before allocating capital to digital assets. Those risks include, but are not limited to, declining network usage, potential for speculative capital outflows, sales from DAT companies, and regulatory headwinds. Aside from all the standard risks that go with buying digital assets and their proxies, these things generally trade at nosebleed valuations when compared to traditional equities. Circulating P/F Ratio (Token Terminal) For instance, on a circulating price-to-fees multiple, ETH has never in its history been as 'overvalued' as it is today. At 3,260x fees, the decline in network fees coupled with the elevated price of the token has created a parabolic rise in the P/F multiple. I'm very concerned about this personally and see it as possible, if not likely, that Ethereum's potential success in stablecoin payments is already being priced in by the market. Not only is stablecoin payment success far from a sure thing broadly within the industry, but there is no guarantee that Ethereum will remain the long-term winner should such success manifest. Closing Summary I'm no longer personally holding FETH. My personal Ethereum exposure is limited to on-chain holdings and a speculative position through Grayscale's Mini fund. In the event FETH does get staking enabled, I could see myself revisiting the product. But for now, I'm downgrading FETH on two core factors: I like an alternative product better, and I'm highly concerned about the token's valuation.
