Grayscale’s upcoming spot Ether exchange-traded fund (ETF) approval by the U.S. Securities and Exchange Commission has sparked conversations about the potential impact it could have on the market. According to analysts at Kaiko, if Grayscale’s Ether Trust (ETHE) follows the pattern set by the Grayscale Bitcoin Trust (GBTC) in its transition to an ETF, we could see an average outflow of $110 million per day. This projection is based on the 23% outflow of GBTC’s assets under management (AUM) in its first month after becoming an ETF.
Over the past three months, ETHE has been trading at a discount of up to 26% to its net asset value (NAV). Kaiko researchers anticipate that as ETHE transitions to a spot ETF, this discount may narrow, leading to potential outflows or redemptions. The narrowing of the discount could impact the average daily trading volume of Ether on platforms like Coinbase.
Will Cai, Head of Indices at Kaiko, highlighted the significance of the SEC’s approval of spot Ether ETFs. The approval indicates that the agency views Ether (without staking) as a commodity rather than a security. This distinction has positive implications for the regulation of similar tokens in the U.S., covering areas such as trading, custody, and transfer. The likelihood of SEC approval increased after issuers excluded staking from their filings, with Bloomberg raising the odds from 25% to 75%.
Since the SEC’s approval of spot Ether ETFs, the discount on ETHE has narrowed gradually. Despite not yet trading as a spot ETF, ETHE has shown a decrease in its discount from over 25% to 1.28% on May 24. This shift in market sentiment towards Ether has been reflected in the narrowing discount on ETHE.
While there may be concerns about potential outflows from ETHE following the ETF approval, Kaiko analysts noted that GBTC’s outflows were offset by inflows into other Bitcoin ETFs by the end of January. This trend suggests that even if there are disappointments in short-term inflows into Ether ETFs, the approval has significant implications for Ether and could shape market sentiment towards the asset in the long run.
The approval of Grayscale’s Ether ETF marks a significant milestone in the cryptocurrency market, with potential implications for market sentiment, trading volume, and regulatory developments. The forecasted outflow projections and discount considerations provide valuable insights into the potential impact of the ETF approval on the market. As the transition of ETHE to a spot ETF progresses, it will be essential to monitor how market dynamics evolve and how investors respond to this groundbreaking development in the crypto space.
Leave a Reply