After the recent approval of spot Ether exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission, analysts predict that Grayscale’s upcoming Ether ETF could potentially experience an average outflow of $110 million per day. This projection is based on the trend set by the company’s Bitcoin Trust, which transitioned into an ETF on January 11 and saw a 23% outflow of its assets under management (AUM) in the first month amounting to $6.5 billion.
Grayscale’s Ether Trust (ETHE) currently has an AUM of $11 billion. If ETHE follows a similar outflow trend as the GBTC, this could result in daily outflows that represent 30% of ETH’s average daily volume on Coinbase. Over the past three months, ETHE has traded at a discount of up to 26% to its net asset value (NAV). Analysts suggest that this discount is likely to narrow once ETHE transitions into a spot ETF, leading to potential outflows or redemptions.
The approval of spot Ether ETFs by the SEC signals that the agency views Ether as a commodity rather than a security, according to Will Cai, Head of Indices at Kaiko. This distinction has positive implications for regulating similar tokens in the U.S. related to trading, custody, and transfer. The increasing likelihood of ETF approval was reinforced after issuers excluded staking from their filings, with Bloomberg raising approval odds from 25% to 75%. Despite growing uncertainty about ETH’s regulatory status, the approval is seen as significant for the market sentiment towards the asset.
Since the SEC’s approval of spot Ether ETFs on May 23, Grayscale’s ETHE discount has gradually narrowed. While ETHE traded at over a 25% discount to its NAV on May 1, the discount decreased to 1.28% by May 24. Analysts observed that GBTC’s outflows were balanced by inflows into other Bitcoin ETFs by the end of January, indicating the potential for market sentiment shifts towards Ether. Even if inflows into Ether ETFs disappoint in the short term, the approval of these ETFs remains significant for ETH’s market positioning.
Overall, the approval of Grayscale’s Ether ETF and the increasing likelihood of ETF approval for similar tokens reflect a growing recognition of digital assets as commodities by regulatory bodies. As market trends continue to evolve and discounts narrow, the impact of ETF approval on market sentiment and investor behavior towards Ether will be closely monitored. With potential daily outflows and narrowing discounts, the transition to spot ETFs could usher in a new phase for Ether and other digital assets in the regulated market landscape.
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