The recent approval of spot Ether exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) has sparked interest in the potential impact on the market, particularly in relation to outflows. A report by Kaiko suggests that Grayscale’s upcoming spot Ether ETF could see significant daily outflows if it follows a similar trend to the company’s Bitcoin Trust.
According to Kaiko’s analysis, the Grayscale Bitcoin Trust (GBTC) experienced a 23% outflow of its assets under management (AUM) in the first month after transitioning to an ETF. Based on this data, the projection for Grayscale’s Ether Trust (ETHE), which currently has an AUM of $11 billion, shows a potential average daily outflow of $110 million, representing 30% of ETH’s average daily volume on Coinbase.
Discounts and Redemptions
Over the past three months, Grayscale’s ETHE has been trading at a discount of up to 26% to its net asset value (NAV). Kaiko researchers believe that as ETHE transitions to a spot ETF, there may be outflows or redemptions as this discount narrows. The narrowing of the discount since the SEC’s approval of spot Ether ETFs on May 23 is a clear indicator of market sentiment shifting towards the asset.
Kaiko’s Head of Indices, Will Cai, highlighted the significance of the SEC’s approval of spot Ether ETFs, indicating that the agency views the underlying asset as a commodity rather than a security. This has positive implications for regulating similar tokens in the U.S. with regards to trading, custody, and transfer. The likelihood of SEC approval was strengthened by recent amendments made by issuers to exclude staking, leading to a boost in approval odds by entities like Bloomberg.
The potential approval of an Ether ETF has not been without its share of uncertainties, as evidenced by the gradual discounting of the possibility over the past month due to regulatory uncertainties surrounding ETH. However, the narrowing of ETHE’s discount post-SEC approval suggests a more positive market response. Despite initial concerns about outflows, Kaiko analysts point out that previous trends show a potential for inflows into Ether ETFs as market sentiment towards ETH improves.
The upcoming launch of Grayscale’s spot Ether ETF has the potential to impact market outflows, particularly in light of the company’s previous experience with Bitcoin ETFs. While projections indicate significant daily outflows, the evolving market sentiment towards Ether, coupled with the SEC’s approval, suggests positive implications for the asset’s future. It remains to be seen how the market will respond to the transition of ETHE to a spot ETF and how inflows and outflows will ultimately shape the landscape for Ether trading.
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