EZBC: Bitcoin's Stagnant Utility Remains A Weakness (Rating Downgrade)

Summary Ethereum is now favored over Bitcoin in capital flows, with August showing a dramatic shift in investor preference and net inflows. Bitcoin's on-chain fundamentals are deteriorating, with declining transaction volumes, fees, and transferred value relative to Ethereum. Ethereum has overtaken Bitcoin in key usage metrics, signaling a potential top for Bitcoin this cycle and stronger fundamentals for ETH. After a significant rally, I am downgrading the Franklin Bitcoin ETF (EZBC) to 'hold,' seeing Ethereum as the better long-term investment. With yet another month in 2025 complete, we grind increasingly closer to decision time for Bitcoin ( BTC-USD ) and Bitcoin ETFs like the Franklin Bitcoin ETF (BATS: EZBC ). I've covered EZBC for Seeking Alpha in the past and happen to like the fund for its designed purpose; specifically, providing exposure to Bitcoin through what is probably a more familiar financial product for the broader investment community. The fund functions essentially identically to most of the other Bitcoin ETFs in the US market and offers a competitive fee. Data by YCharts To this point, the legitimacy of EZBC as a viable Bitcoin product isn't really the point of this update. We have seen over the last year that EZBC holds up just as well as the market-leading ETF product and is superior to futures-based alternatives. Rather, in this article we will take an updated look at Bitcoin's capital flow story as well as on-chain metrics through August to determine whether or not network fundamentals are showing any meaningful progress. Capital Flows Now Favor ETH Of course, on-chain utility is just one part of the story. The demand for BTC from DATs and ETF investors has been enormous in 2025. But it should be noted that investors are now starting to favor ETH over BTC. Consider the change in share of net flow dominance that we just witnessed in August: Asset (mil) MTD Flows YTD Flows AUM Bitcoin -$301 $20,797 $166,721 Ethereum $3,955 $12,086 $37,856 Multi-asset -$4.4 $113 $7,619 Solana ( SOL-USD ) $388.8 $1,240 $3,277 XRP ( XRP-USD ) $307.0 $1,396 $2,659 Total $4,376 $35,527 $219,876 BTC Dominance -6.9% 58.5% 75.8% ETH Dominance 90.4% 34.0% 17.2% Source: CoinShares/Bloomberg, as of August 30th Through the end of August, full month net flows for Bitcoin were negative by over $300 million. By itself, that isn't a huge problem but the reason I see a potential issue is because the outflow is generally exclusive to Bitcoin. Solana and XRP both saw YTD flows grow dramatically in August. Almost $4 billion was poured into ETH during the month - which was a 50% increase in the year-to-date net flows for ETH from the end of July in just a single month. You can see from the dominance calculations in the table above that BTC's YTD flow dominance has fallen down to 58%. To be sure, August was a large outlier. But it is arguably a continuation of a trend that started in July: Through July 2025 (CoinShares/Bloomber) Where ETH net flows were almost at parity with BTC in July, August was decidedly an overweight ETH month. ETH is benefiting from both surging acquisitions by investors as well as improved on-chain fundamentals. Similar to the investment net flow story, Bitcoin's on-chain metrics in August also showed deterioration. On Chain Metrics Through August Bitcoin DAAs (Token Terminal) Monthly DAAs continue to trend flat-to-down for Bitcoin with 10.8 million active addresses during August. That was actually up 2.9% year over year but still well below highs from 2021 and 2023. Where DAAs have largely held up against averages through the first 7 months of 2025, transactions have been falling: Bitcoin Metrics August 2024 July 2025 August 2025 YoY MoM DAAs* 10.5 10.7 10.8 2.9% 0.9% Transactions* 18.5 13 14.1 -23.8% 8.5% Fees* $20.73 $16.42 $13.20 -36.3% -19.6% Avg Tx Fee $1.08 $1.28 $0.96 -11.1% -25.0% Source: Token Terminal, *figures in millions Transactions fell to 14.1 million in August. While that was up 8.5% from July, it was down by 24% year over year; coupled with the 11% dip in average transaction fee, monthly fees paid to miners fell to just $13.2 million in August. That was down 36.3% year over year and just under 20% from July. Share of Transferred Value (CoinMetrics) The other thing to consider is dollar-denominated transferred value. I've stacked ETH vs BTC transferred value shares in the chart above. After bottoming out at 27% share of transferred value in May, ETH rocketed up to 53% share of transferred value at the end of August. I see two major signals here. First, I believe it is indicative of Ethereum overtaking Bitcoin in an important fundamental metric given the stark differences between the two assets in several other key metrics. And second, it could also be seen as an indication that Bitcoin's top is either close or already here for this cycle. During the 2017 bull run, ETH's share of transferred value peaked at 50%. In 2021 it hit 58%. At 53% currently, I think Bitcoiners would be wise to consider the possibility that the gains have been had for 2025. Final Thoughts There is perhaps an argument to be made that on-chain fundamentals don't really matter; that somehow, Bitcoin is a special asset that simply needs to be held to let supply/demand produce higher prices in perpetuity. After all, a major takeaway from the block size war last decade was that narratives can change and Bitcoin is more 'Digital Gold' than a decentralized 'peer to peer' money system. If that is true, then capital flows into the asset might really be the only thing that matters. Yet, I have long argued that assertion is false. And that all of the hoarding through ETFs and/or DATs will ultimately lead to network security issues down the line. Regardless, I've been willing to look beyond my own opinions of Bitcoin and simply follow the market instead. But the market is singing a different tune today. Where Bitcoin previously dominated all other digital assets through investor net flows, Ethereum is seemingly taken its turn. Importantly, beyond simply benefiting from investment demand, Ethereum has terrific fundamentals as well through usage and stablecoin transfer volume. This is not to say that I'm exiting my Bitcoin position entirely. Frankly, I have Bitcoin that I will likely never sell. But I think Ethereum is the better long term investment at this point in time. After an 82% rally from my initial coverage, I'm downgrading EZBC to 'hold.'