Grayscale's Upcoming Ether ETF Launch Could Trigger $110M Daily Outflows: Report
Summary:
The proposed launch of Grayscale’s spot Ether (ETH) exchange-traded fund (ETF) may lead to an average daily outflow of $110M, mirroring its Grayscale Bitcoin Trust's pattern post its conversion to an ETF. Over the past three months, ETHE has been trading at up to a 26% net asset value discount. Analysts have noted that a likely decrease in this discount may lead to outflows upon its conversion to an ETF. As per the report, even if Ether ETF inflows fail to meet the short-term expectations, the approval implies key progress for ETH as an asset, eliminating significant regulatory ambiguity previously affecting its performance.
The anticipated launch of Grayscale's spot Ether (ETH) exchange-traded fund (ETF) could result in an average of $110 million being drained daily if it reflects the behavior of its Grayscale Bitcoin Trust in the initial month after launch. Transforming from a closed-end fund to an ETF on January 11, the Grayscale Bitcoin Trust (GBTC) saw a 23% outflow of its total assets under management (AUM) amounting to $6.5 billion in the first month, according to a report published on May 27 by Kaiko analysts. With an AUM of $11 billion, ETHE may experience similar extent of outflows equating to $110 million in average daily outflows or 30% of ETH's average daily trading volume on Coinbase.
Over the past quarter, Grayscale's ETHE has been traded for up to 26% less than its net asset value (NAV) on some occasions. Kaiko's study suggests that upon its conversion to a spot ETF it is "likely" to see outflows or redemptions as this discount decreases.
The discount to NAV of GBTC, which is the magnitude by which it traded below the asset’s real value, significantly reduced after it became an ETF. Initially, trading at up to a 17% discount, the discount gradually shrank, enabling holders to exit GBTC at the same or a better price than they bought in. Currently at a 0.03% discount for May 24 according to YCharts, it has been maintaining this level since then.
ETHE, whose discount has already began reducing since the U.S. Securities and Exchange Commission (SEC) initially approved spot Ether ETFs on May 23, is yet to be traded as a spot ETF.
ETHE was trading for more than 25% less than its net worth on 1st May, but this discount has progressively been reduced over the month due to speculation about spot Ether ETFs being approved by the SEC. It swiftly reached a 1.28% discount on May 24, according to YCharts data.
Kaiko's analysts also found that by January end, the outflows from GBTC were exceeded by inflows into other Bitcoin ETFs. In conclusion, even if Ether ETF inflows “fall short of expectations in the near future, the SEC's approval paves way for ETH being recognized as an asset, eliminating some regulatory ambiguity that has been hampering ETH's performance over the previous year.”
Published At
5/28/2024 4:58:45 AM
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