Ethereum
Grayscale has fought hard for Bitcoin ETFs. Why this won’t bother Ethereum – DL News
- Grayscale is unlikely to sue the SEC over Ethereum ETFs like it did over Bitcoin.
- The price was an issue. Its ETF has lost $17 billion in Bitcoin since January.
Crypto asset manager Grayscale is unlikely to go to war again for Ethereum.
Grayscale sued the Securities and Exchange Commission in 2022 in an effort to offer its clients Bitcoin ETFs. The deal was favorable and paved the way for the launch of the products.
But now?
“They’re probably like, ‘To hell with that.’ Let someone else step in this time,” said Bloomberg Intelligence ETF analyst Eric Balchunas. DL News.
The office this week withdrew a file which that would have made things more difficult for the SEC to defend the denial of Ethereum spot ETFs in court.
“They just take their ball and go home,” Balchunas said.
“And part of me doesn’t blame them. It’s not just about money, it’s about bandwidth, it’s about attention.
Learn from Bitcoin
The SEC spent years rejecting applications for Bitcoin spot ETFs before Grayscale filed a lawsuit against the regulator in protest in 2022.
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The courts recognized that something was wrong.
In September, a judge ruled that the SEC had acted “arbitrarily and capriciously” in rejecting the requests.
Thus, Grayscale was able to convert its Bitcoin trust into a spot ETF, finally giving investors the option to exit the fund if they wanted. And 10 other companies, including BlackRock and Fidelity, have launched their own ETFs.
But this decision backfired on Grayscale. Its ETF has lost more than $17 billion in Bitcoin since January, while BlackRock and Fidelity funds have sucked up more than $23 billion in assets.
Balchunas said Grayscale probably didn’t expect the outings to be so violent.
“Seventy-eight days of consecutive outings. They broke all records,” he said. “They didn’t realize how tough the U.S. ETF market was.”
The problem was Grayscale’s 1.5% management fee, which turned out to be several times higher than their competitors’ 0.2% or 0.3% fees.
“They probably thought everyone would be between 0.7% and 1%, so they wouldn’t be too far off at 1.5%,” Balchunas said.
Ethereum ETF
Grayscale’s Ethereum trust has nearly $9 billion in assets – which would likely disappear if the vehicle were converted into a real ETF.
These funds are trapped because the current structure does not allow redemptions. Grayscale charges a solid 2.5% fee on these assets.
The other problem is that the demand for an Ethereum ETF is simply not as strong as for the Bitcoin ETF.
Balchunas predicted that, if launched, Ethereum ETFs will only get about 10-15% of the assets collected by Bitcoin ETFs.
“Grayscale has less to lose” by not fighting for Ethereum ETFs, Balchunas said. “Bitcoin ETFs are the star.”
Ethereum ETFs “will never receive the same feverish attention surrounding their approval.”
Tom Carreras is a markets correspondent at DL News. Do you have advice on Grayscale and Ethereum ETFs? Contact us at tcarreras@dlnews.com