Grayscale’s Spot Ether ETF Expected to See Average Daily Outflow of $110M: Kaiko

Last updated: May 28, 2024 at 2:20 a.m. EDT | 2 minutes of reading

Grayscale’s upcoming spot Ethereum exchange-traded fund (ETF) could face significant capital outflows, averaging around $110 million per day.

In a recent reportanalytics firm Kaiko said the projection is based on the trend seen with Grayscale’s Bitcoin Trust (GBTC) when it converted from a closed-end fund to an ETF on January 11.

In the first month following the conversion, GBTC saw 23% of its assets under management (AUM), totaling $6.5 billion.

Grayscale’s Ethereum ETF has $11 billion in assets under management

Grayscale’s Ether Trust (ETHE) currently has $11 billion in assets under management.

If it experiences similar outflows to GBTC, this could result in average daily outflows of $110 million, which is about 30% of Ether’s average daily trading volume on Coinbase, as Kaiko stated.

Recent data showed that over the past three months, ETHE has been trading at a discount of up to 26% to its net asset value (NAV).

Kaiko researchers pointed out that once it moves to a cash ETF, it is reasonable to expect outflows or redemptions as the discount narrows.

A similar trend was observed with GBTC, as its discount to NAV narrowed significantly after the ETF conversion.

It traded at a discount of up to 17% before the conversion, but gradually narrowed over time, allowing investors to exit the trust at or above their entry price.

Following the initial approval of spot Ether ETFs by the Securities and Exchange Commission on May 23, ETHE’s discount has already begun to narrow.

However, the ETF has not yet started trading as a spot ETF.
Data from YCharts reveals that ETHE’s discount had exceeded 25% on May 1, but gradually declined over the course of the month due to speculation surrounding the SEC’s potential approval of spot Ether ETFs.

By May 24, the discount had reached 1.28%.

Kaiko analysts also pointed out that outflows from GBTC were outpaced by inflows to other Bitcoin ETFs in late January.

They concluded that while initial inflows into Ether ETFs are disappointing in the short term, the approval itself has significant implications for Ether as an asset, removing some of the regulatory uncertainty that has weighed on its performance over the past year.

Spot Ether ETF Approval Paves Way for More Crypto Funds

The recent approval of Ethereum ETFs has opened the door to more crypto investment productsaccording to a study by TD Cowen’s Washington Research Group.

Although the speed of approval surprised some, the research group considered it an inevitable outcome after the approval of Bitcoin ETFs earlier this year.

Jaret Seiberg, a member of the TD Cowen team, noted that the approval of the Ethereum ETF came about six months earlier than expected, but was expected after the Securities and Exchange Commission (SEC) green light for crypto futures ETFs.

Additionally, the approval of spot ETH ETFs potentially confirms Ether’s status as a non-security, according to industry experts.

As noted, Bloomberg ETF analyst James Seyffart said the approval of these commodity-based trust actions implies that the SEC explicitly recognizes Ether as not being a security.

Seyffart further suggested that this recognition could also extend to other tokens, thus strengthening their classification as commodities.

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