Grayscale’s forthcoming spot Ethereum exchange-traded fund (ETF) may face significant outflows, potentially averaging around $110 million per day.
In a recent report, analysis firm Kaiko said the projection is based on the pattern observed with Grayscale’s Bitcoin Trust (GBTC) when it converted from a closed-end fund to an ETF on January 11.
In the first month following the conversion, the GBTC saw 23% of its assets under management (AUM) flow out, totaling $6.5 billion.
Grayscale’s Ethereum ETF Has $11B in AUM
Grayscale’s Ether Trust (ETHE) currently has an AUM of $11 billion.
If it experiences similar outflows as GBTC, it could result in average daily outflows of $110 million, representing around 30% of Ether’s average daily trading volume on Coinbase, as stated by Kaiko.
Recent data has shown that over the past three months, ETHE has traded at a discount of up to 26% compared to its net asset value (NAV).
Kaiko researchers highlighted that once it transitions into a spot ETF, it’s reasonable to expect outflows or redemptions as the discount narrows.
A similar trend was observed with GBTC, as its discount to NAV significantly narrowed after the conversion to an ETF.
It traded at a discount of up to 17% before the conversion but has gradually narrowed over time, allowing investors to exit the trust at or above their entry price.
Following the Securities and Exchange Commission’s initial approval of spot Ether ETFs on May 23, ETHE’s discount has already started to narrow.
However, the ETF has yet to commence trading as a spot ETF.
Data from YCharts reveals that ETHE’s discount had exceeded 25% on May 1 but gradually decreased over the month amid speculation surrounding the SEC’s potential approval of spot Ether ETFs.
By May 24, the discount had reached 1.28%.
Kaiko analysts also pointed out that GBTC’s outflows were surpassed by inflows into other Bitcoin ETFs by the end of January.
They concluded that even if the initial inflows into Ether ETFs disappoint in the short term, the approval itself has significant implications for Ether as an asset, removing some of the regulatory uncertainty that has weighed on its performance over the past year.
Is #ETH headed for a bull run?
In a surprising turnaround, the SEC approved the first spot ETH #ETFs last week, triggering more than 25% in gains for the second largest crypto asset.
Check out our latest Data Debrief for the full trendhttps://t.co/l3I4isZVjx
— Kaiko (@KaikoData) May 27, 2024
Spot Ether ETF Approval Paves Way for More Crypto Funds
The recent approval of Ethereum ETFs has opened the doors for more crypto investment products, according to research from TD Cowen’s Washington Research Group.
While the speed of approval caught some off guard, the research group viewed it as an inevitable outcome following the approval of Bitcoin ETFs earlier this year.
Jaret Seiberg, a member of TD Cowen’s team, noted that the Ethereum ETF approval came about six months earlier than expected but was predictable after the Securities and Exchange Commission (SEC) gave the green light to crypto futures ETFs.
Furthermore, the approval of spot ETH ETFs potentially confirms Ether’s status as a non-security, according to industry experts.
As reported, Bloomberg ETF analyst James Seyffart has said that the approval of these commodity-based trust shares implies that the SEC explicitly recognizes Ether as not being a security.
Seyffart further suggested that this recognition could extend to other tokens as well, solidifying their classification as commodities.
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