Swirling geopolitical risks in the Middle East are the latest headwind battering Ethereum-based funds, as a streak of outflows continues apace.

Over the past five weeks, investors have yanked $118 million from digital asset investment products tracking Ethereum, according to a report from CoinShares on Monday. Meanwhile, Bitcoin-based funds have attracted over $3.5 billion in inflows.

“Investors are seemingly hesitant since the positive price momentum has stalled,” James Butterfill of CoinShares wrote in the report, adding that Ethereum “suffered [the most] on a relative basis” amid a selloff last week.

The second-largest cryptocurrency by market cap has fallen 14% to $3,100 over the past seven days as fears materialized of drone attacks in Israel from Iran, according to CoinGecko. Concerns of a broader conflict in the region come as hopes for a spot Ethereum ETF in the U.S. continue to dim and a reported regulatory inquiry looms.

However, a new group of crypto investors will soon join the fray. Last week, Hong Kong’s securities regulator conditionally approved spot Ethereum and Bitcoin ETFs in the region. While any inflows could help, Bloomberg’s Eric Balchunas said they still aren’t expected to reverse major tides in the crypto market.

“Other countries adding [...] ETFs is no doubt additive, but it's nickel-dime compared to the mighty U.S. market,” he said on Twitter (aka X), estimating Hong Kong-based crypto funds attract $500 million total between Bitcoin and Ethereum. “Don't expect a lot of flows.”

In the U.S., spot Ethereum ETFs are appearing ever less likely in the short term. As a May deadline for the Securities and Exchange Commission (SEC) to respond to spot Ethereum ETF applications approaches swiftly, approval odds have plummeted to 18% on Monday from 76% in January, per the crypto-based prediction site Polymarket.

Analysts have pointed to a lack of meaningful interactions between asset managers and the SEC ahead of the key deadline. Adding to the pressure, The Ethereum Foundation disclosed last month that a "state authority" was investigating the Swiss nonprofit that helps support Ethereum’s ecosystem. Fortune reported that the SEC has been asking crypto companies for details regarding their interactions with the Ethereum Foundation.

Outflows from Ethereum-based funds have persisted as investors have allocated millions to altcoins like Solana and Litecoin, a report published last week by CoinShares stated. Though Ethereum’s recent Dencun upgrade significantly improved the network’s user experience by cutting layer-2 networks fees substantially, 3iQ’s Mark Connors believes it’s been drowned out by ETF news.

“Daily prices are driven by momentum and that momentum is leaving Ethereum,” he told Decrypt. “There's a lot of good news on traffic, fees, and utility on Ethereum, but 2024 has been all about the ETFs.”

Edited by Andrew Hayward