New Report Highlights Grayscale’s Potential Impact on Ethereum Price with Ethereum Spot ETFs
In a recent market report, research firm Kaiko pointed out the potential negative impact of Grayscale’s Spot Ethereum ETF on the price of Ethereum (ETH). The report draws comparisons to Grayscale’s Bitcoin Trust (GBTC) and suggests that Grayscale’s Ethereum Trust (ETHE) could face similar challenges.
Kaiko highlights that once the Spot Ethereum ETFs start trading, Ethereum could face significant selling pressure from Grayscale’s ETHE. The fund has been trading at a discount of 6% to 26% over the past three months, indicating a wave of profit-taking could take place. It’s important to note that Grayscale’s ETHE previously operated as a closed-end fund before applying for conversion to an ETF.
Grayscale’s ETHE currently holds over $11 billion in assets under management (AuM). According to Kaiko’s analysis, if Grayscale’s Ethereum ETF experiences a comparable magnitude of outflows to Grayscale’s Bitcoin ETF, daily average outflows of $110 million could leave the fund. In the first month of trading, Grayscale’s Bitcoin ETF recorded outflows of $6.5 billion, which amounted to 23% of the fund’s AuM.
Similar to Grayscale’s Bitcoin Trust, which saw significant outflows when it operated as a closed-end fund, Kaiko expects that Grayscale’s ETHE could experience a similar fate. The outflows from Grayscale’s Spot Bitcoin ETF had a considerable impact on Bitcoin’s price, leading to a significant decline. Therefore, if Grayscale’s Spot Ethereum ETF faces a similar situation, Ethereum’s price could be affected as well.
Besides investors taking profit, Kaiko suggests that Grayscale’s fund fee was another factor contributing to the significant outflows experienced by Grayscale’s Bitcoin ETF. Reducing the fee for Grayscale’s Ethereum ETF could potentially minimize the outflows this time around.
Kaiko remains bullish on Ethereum’s future trajectory and believes that once other Ethereum Spot ETFs start recording substantial inflows, they can overshadow the outflows from Grayscale’s ETHE. This aligns with what happened with Bitcoin, as Kaiko notes that inflows from other Bitcoin ETFs surpassed and offset Grayscale’s GBTC outflows by the end of January, leading to Bitcoin’s new all-time high in March.
Even if the inflows disappoint in the short term, Kaiko emphasizes that the mere approval of these funds has important implications for Ethereum as an asset. It confirms that Ethereum is not considered a security, helping to remove the regulatory uncertainty that has weighed on its price for some time.
(source: modified from original article)