In the same information window around May 7, the signals on-chain and in the market regarding ETH gave completely different indications: on one hand, approximately 30,766 ETH expected to be unlocked according to the proposal passed by the Arbitrum DAO, related to the addresses of the Arbitrum Security Council that had previously frozen assets due to earlier security incidents, which will be transferred to a designated multi-signature address for the rescue and compensation of assets related to rsETH. The proposal received a support rate of about 90.96%, reflecting a path for leading L2s in the Ethereum ecosystem to repair security incidents and restore the credibility of infrastructure through on-chain governance; on the other hand, according to AiCoin data, on May 7, 2026, the Ethereum spot ETF recorded a total net outflow of approximately $103.51 million for the day, with Fidelity's FETH seeing a net outflow of about $62.26 million and BlackRock's ETHA seeing a net outflow of approximately $26.31 million. Grayscale's ETHE and 21Shares TETH also saw similar capital outflows. While on-chain governance leans towards repair and compensation, the allocation of off-market derivative products for ETH has shown a clear reduction in positions, overall reflecting a cautious sentiment at the institutional level.

30,000 ETH Unlock: How Arbitrum Stops the Bleeding

The core of this AIP is to unlock approximately 30,766 ETH, which was previously frozen by the Arbitrum Security Council due to a security incident, and to transfer it in total to a designated multi-signature address as agreed in the proposal, to be used as a funds pool for recovering and compensating assets related to rsETH. The process first involves the council lifting the freeze constraints at a technical level, followed by the DAO migrating the assets to a governance-authorized multi-signature account, forming a dual-layer structure of "Security Council backing and DAO responsible for allocation," avoiding single-point decisions facing direct compensation pressure and reserving space for processing damaged assets according to standardized procedures in the future.

From the initiating entities and voting results, this governance effort appears to be more of a cross-protocol cooperative stop-loss initiative: Aave Labs collaborated with multiple parties including KelpDAO, LayerZero, EtherFi, and Compound to jointly submit a proposal aimed at providing a collective rescue for the affected rsETH users at the asset level, rather than each battling on their own protocol. The proposal was completed before voting on May 8, with a support rate of about 90.96%, implying that there were virtually no substantive objections from governance participants regarding both the unfreezing itself and the "concentrating into multi-signature and then unifying handling" plan. In terms of specific execution, the Security Council's prior rapid freeze and subsequent transition to the DAO for unfreezing and transferring to the multi-signature mode demonstrates Arbitrum's tendency to tighten risk exposure in major security incidents first, and then restore asset liquidity through high-consensus governance proposals. This sequence of controlling loss first and then negotiating compensation has become a key risk control approach for its L2 governance.

On-Chain Relief for Affected rsETH Users

The approximately 30,766 ETH being unlocked has been explicitly stated in the proposal to be "exclusively for the recovery of assets related to rsETH," linking the frozen assets of the Security Council directly with the compensation for rsETH users: the frozen funds will not return to the treasury or serve as general reserves, but will be transferred to a previously agreed multi-signature address according to the governance resolution, with this multi-signature serving as the intermediary and custodian, and any subsequent transfer from the multi-signature to specific damaged addresses must be confirmed by multiple signatures. For ordinary rsETH holders, this means that their loss recovery will be directly tied to a traceable on-chain path. Although public information has not disclosed the specific compensation ratio or arrival time for each user, every step from unfreezing to entering the multi-signature and then to future distribution will leave clear transaction records and permission trails on the chain.

From the composition of the initiating entities, it is evident that this is not a single protocol "acting alone" in response to the event. Among the proposal partners are both Aave on the lending protocol side and participants in re-staking and liquidity staking such as KelpDAO and EtherFi. This cross-protocol collaborative effort to promote unfreezing and compensation acknowledges the inter-protocol correlation risks behind the rsETH incident: once the problems arise with re-staking derivative products, it will affect the entire chain of lending, liquidity, and yield. By placing the compensation funds in a multi-signature arrangement, overseen by multiple parties, the large protocols signal a willingness to share part of their reputational and governance responsibilities in a "joint proposal and joint supervision" manner. Under the premise that risks have already been exposed, they are attempting to redefine acceptable risk boundaries for the interconnected DeFi ecosystem through transparent and auditable relief procedures.

Over $100 Million Net Outflow from Ethereum Spot ETF in One Day

According to publicly available data, on May 7, 2026, the Ethereum spot ETF recorded a total net outflow of about $103.51 million. Among them, Fidelity's FETH saw a net outflow of about $62.26 million for the day, while BlackRock's ETHA had a net outflow of approximately $26.31 million, constituting the main sources of redemption for that day. Grayscale's ETHE and 21Shares' TETH also saw net redemptions on the same day, although specific scales were not disclosed, but the trends were consistent with the overall data. These products are core tools in the current Ethereum spot ETF market, directly reflecting the compliance-related institutional fund's short to medium-term allocation tendencies towards ETH.

Considering the recent market environment, this level of single-day net outflow exceeding $100 million appears more as a temporary adjustment of positions by previously entered funds amid price volatility and macroeconomic uncertainties, rather than a consistent denial of Ethereum's long-term fundamentals. The mainstream ETFs slightly reduced positions collectively, which signals traditional institutions' tendency to decrease short-term exposure and lock in some gains on their books. On the other hand, this also reflects that during the stage of digesting on-chain risk events, off-market compliant funds are more willing to maintain flexible positions and a wait-and-see attitude.

On-Chain Governance is Active, but ETF Positions are Reduced?

When viewed in the same time window, Arbitrum and Ethereum spot ETFs are sending completely different signals: on one hand, the protocol layer is actively repairing risks, while on the other hand, off-market funds are choosing to reduce exposure. The former is reflected in that Arbitrum DAO has approved a proposal with approximately 90.96% approval to unfreeze about 30,766 ETH and transfer it to a designated multi-signature address for recovering the impact from the rsETH-related security incidents and compensating the affected holders; the latter shows on May 7, 2026, the Ethereum spot ETF recorded a net outflow of around $103.51 million, with Fidelity's FETH seeing an outflow of around $62.26 million and BlackRock's ETHA an outflow of approximately $26.31 million, with Grayscale's ETHE and 21Shares' TETH showing similar trends. Public information has not shown a direct causal relationship between ETF reductions and the Arbitrum incident; the two clues seem to be more independent "thermometers": the efficiency of on-chain governance voting and execution correlates with whether L2 infrastructures, represented by Arbitrum, can quickly stop the bleeding and restore order after incidents; while the increases and decreases in ETF shares primarily reflect the short-term risk appetite adjustments of compliant institutions towards assets like ETH under the current macro environment and volatility.

From a medium to long-term perspective of the Ethereum ecosystem, L2s like Arbitrum, which have high market value and activity, are viewed by some institutions as positive examples of "governable and repairable" underlying infrastructure due to their governance process of asset freezing, voting to unfreeze, and subsequently directing compensation paths in the aftermath of security incidents, which helps to maintain or even enhance their confidence in long-term allocations towards ETH. However, at the trading level, as long as ETF holders still face price retracement and macroeconomic uncertainties, redemption and short-term reduction pressures will be difficult to eliminate. This means that the states of "improved L2 governance health" and "cautiousness in the secondary market" can coexist for an extended period without being interpreted as a consistent denial of Ethereum's fundamentals.

Future Governance and ETF Indicators to Monitor

In summary, Arbitrum's unfreezing of approximately 30,766 ETH through the Security Council's asset freeze and subsequent unfreeze by the DAO with an approval rate of about 90.96% indicates an on-chain signal of "proactive repair" from the underlying protocol side. In contrast, the approximately $103.51 million net outflow from the Ethereum spot ETFs on May 7 represents the behavior of off-market institutions choosing to "reduce allocation" under price and macro pressures. These two aspects together create a current divergence scenario for Ethereum, where "infrastructure is being repaired on one side while institutions remain cautious" is evident. Moving forward, the on-chain side needs to continuously track when and through what paths the unlocked ETH flows out of the multi-signature address and whether it enters the compensation addresses for affected rsETH users as expected; whether the Arbitrum DAO will continue to strengthen security audits, emergency freezing, and unfreezing processes in subsequent proposals, and be validated in new governance voting. Meanwhile, the off-market side should observe whether the subscriptions and redemptions of each Ethereum spot ETF after May 7 will continue net outflows or see reversals into net subscriptions, and how this rhythm will be repriced under the integrated effects of Ethereum's price performance, macro interest rate environment, and the possibility of more security incidents occurring.

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