tl;dr
Grayscale's upcoming spot Ether exchange-traded fund (ETF) could potentially see an average outflow of $110 million per day, following the trend set by the company's Bitcoin Trust. This projection comes after the approval of spot Ether ETFs by the U.S. Securities and Exchange Commission. The Graysca...
Grayscale's upcoming spot Ether exchange-traded fund (ETF) could potentially see an average outflow of $110 million per day, following the trend set by the company's Bitcoin Trust. This projection comes after the approval of spot Ether ETFs by the U.S. Securities and Exchange Commission. The Grayscale Bitcoin Trust transitioned to an ETF on January 11 and experienced a 23% outflow of its assets under management in the first month, amounting to $6.5 billion. Grayscale's Ether Trust, with an AUM of $11 billion, may experience similar outflows, potentially resulting in daily outflows of $110 million. The approval of spot Ether ETFs by the SEC implies the agency views the underlying asset as a commodity rather than a security, which has positive implications for regulating similar tokens in the U.S. The likelihood of SEC approval became more evident after several issuers amended their filings to exclude staking, leading to increased approval odds from 25% to 75%. Despite growing uncertainty about ETH's regulatory status, Grayscale's Ether Trust discount has narrowed since the SEC's approval of spot Ether ETFs. The approval is considered significant for ETH and could significantly shift market sentiment toward the asset, even if inflows into Ether ETFs disappoint in the short term. Grayscale’s upcoming spot Ether exchange-traded fund (ETF) could potentially see an average outflow of $110 million per day if it follows the trend set by the company’s Bitcoin Trust in its first month, according to a report by Kaiko. This projection follows the approval of spot Ether ETFs by the U.S. Securities and Exchange Commission last week. The Grayscale Bitcoin Trust (GBTC) transitioned from a closed-end fund to an ETF on January 11. As reported by Kaiko analysts on May 27, it experienced a 23% outflow of its assets under management (AUM) in the first month, amounting to $6.5 billion. Grayscale’s Ether Trust (ETHE) has an AUM of $11 billion. If ETHE sees a similar level of outflows as GBTC, this could result in average daily outflows of $110 million, representing 30% of ETH’s average daily volume on Coinbase. Over the past three months, Grayscale’s ETHE has traded at a discount of up to 26% to its net asset value (NAV). Kaiko researchers suggest that once ETHE transitions to a spot ETF, it is “reasonable to expect” outflows or redemptions as this discount narrows. Will Cai, Head of Indices at Kaiko, commented on the SEC’s approval of spot Ether ETFs, stating that it implies the agency views the underlying asset (without staking) as a commodity rather than a security. Cai added that this has significant positive implications for regulating similar tokens in the U.S. concerning trading, custody, and transfer. The likelihood of SEC approval became more evident last week after several issuers amended their filings to exclude staking. On May 20, Bloomberg even increased the approval odds from 25% to 75%. Kaiko noted that the possibility of an ETF approval had been gradually discounted over the past month due to growing uncertainty about ETH’s regulatory status. Meanwhile, Grayscale’s Ether Trust (ETHE) discount has narrowed since the SEC initially approved spot Ether ETFs on May 23, though ETHE has yet to begin trading as a spot ETF. On May 1, ETHE traded at over a 25% discount to its net asset value (NAV). However, this number steadily decreased throughout the month, reaching 1.28% on May 24, according to YCharts. Kaiko analysts highlighted that GBTC’s outflows were offset by inflows into other Bitcoin ETFs by the end of January. They concluded that even if inflows into Ether ETFs “disappoint in the short term,” the approval is significant for ETH and could significantly shift market sentiment toward the asset.