Ethereum Spot ETFs: Report Shows Grayscale Could Keep ETH Price Down With $110M Daily Outflows
May 28 2024 - 6:00PM
NEWSBTC
A recent market report by research firm Kaiko noted how Grayscale’s
Spot Ethereum ETF could have a negative impact on Ethereum’s (ETH)
price. This is based on the firm’s expectations that Grayscale’s
Ethereum Trust (ETHE) could follow a similar path to Grayscale’s
Bitcoin Trust (GBTC). Ethereum Could Face Significant Selling
Pressure From Grayscale’s Outflows Kaiko noted that Ethereum could
face significant selling pressure from Grayscale’s ETHE once the
Spot Ethereum ETFs begin trading. This is because the fund has been
trading at a discount between 6% and 26% over the past three
months, with a wave of profit-taking likely to concur. It is worth
mentioning that Grayscale’s ETHE has previously operated as a
closed-end fund, with Grayscale simply applying to convert it to an
exchange-traded fund (ETF). Related Reading: Crypto Analyst
Says XRP Price Will Crash 80% To $0.10, What’s The Trigger? The
research firm noted that Grayscale’s ETHE has over $11 billion in
assets under management (AuM). That means that $110 million of
daily average outflows could leave the fund if Grayscale’s Ethereum
ETF sees a similar magnitude of outflows to Grayscale’s Bitcoin
ETF, whose $6.5 billion outflows in the first month of trading
amounted to 23% of the fund’s AuM. Grayscale’s Bitcoin Trust
(GBTC) also operated in a similar fashion before it was converted
to an ETF. This is believed to have contributed to the $6.5 billion
outflows the fund recorded in the first month of trading, with many
investors taking profit since they purchased the fund at a
discount. Therefore, Kaiko expects that something similar could
happen with Grayscale’s ETHE. The outflows that Grayscale’s
Spot Bitcoin ETF is known to have exerted significant selling
pressure on Bitcoin’s price, causing the flagship crypto to decline
significantly. As such, the same thing can be expected with
Ethereum’s price if Grayscale’s Spot Ethereum ETF suffers a similar
fate. However, besides investors taking profit from
Grayscale’s Bitcoin ETF, Grayscale’s fund fee is believed to be
another factor that sparked the significant outflows it recorded
back then. For context, Grayscale’s fee was the highest among all
the Bitcoin ETF issuers. As such, the potential outflows from
Grayscale’s Ethereum ETF could be minimally reduced if the asset
manager makes it fee competitive this time around. Ethereum’s
Future Trajectory Still Bullish Kaiko suggested that Ethereum is
still bound to make significant price gains once other Ethereum
Spot ETFs begin to record impressive inflows that can overshadow
the outflows from Grayscale’s ETHE. Something similar happened with
Bitcoin, as Kaiko noted that Grayscale GBTC’s outflows were offset
and surpassed by inflows from other Bitcoin ETFs by the end of
January. Related Reading: Crypto Analyst Predicts 28,900%
Rally To $154 For XRP Price, Here’s When Thanks to the impressive
demand that these Bitcoin ETFs recorded, the flagship crypto hit a
new all-time high (ATH) in March earlier this year. The Ethereum
ETFs could also trigger such a rally for ETH’s price depending on
the amount of inflows these funds record once they begin
trading. Meanwhile, Kaiko noted that even if the inflows
disappoint in the short term, the mere approval of these funds
already has “important implications for ETH as an asset” since it
confirms that it isn’t a security. This has helped remove the
regulatory uncertainty that has weighed on Ethereum’s price for
some time now. Featured image from NewsBTC, chart from
Tradingview.com
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