AND latest market report by research firm Kaiko noted that Grayscale’s Spot Ethereum ETF could have a negative impact on the price of Ethereum (ETH). This is based on the company’s expectation that Grayscale’s Ethereum Trust (ETHE) may follow a similar path Grayscale’s Bitcoin Trust (GBTC).
Ethereum could face significant selling pressure from Grayscale outflows
Kaiko noticed this Ether may face significant selling pressure from Grayscale’s ETHE once Spot Ethereum ETFs begin trading. That’s because the fund stayed discount trading between 6% and 26% over the last three months, with a wave of profit-taking likely. It is worth mentioning that Grayscale’s ETHE fund previously operated as a closed-end fund, and Grayscale simply applied to convert it to an exchange-traded fund (ETF).
The research firm noted that Grayscale’s ETHE has over $11 billion in assets under management (AuM). This means the fund could exit the fund within an average daily outflow of $110 million if Grayscale’s Ethereum ETF experiences similar outflows to Grayscale’s Bitcoin ETF, which saw outflows of $6.5 billion in its first month of trading. 23% of the fund’s AuM value.
Grayscale’s Bitcoin Trust (GBTC) it also operated in a similar way before it was converted into an ETF. This is believed to have contributed to the $6.5 billion outflow the fund saw in its first month of trading, with many investors profiting because they bought the fund at a discount. Therefore, Kaiko expects something similar could happen with Grayscale’s ETHE.
Outflows of this Grayscale’s Bitcoin spot ETF is known to have put significant selling pressure on Bitcoin’s price, causing the flagship cryptocurrency to decline significantly. Therefore, the same can be expected for Ethereum price if Grayscale’s Spot Ethereum ETF suffers a similar fate.
However, beyond investors profiting from Grayscale’s Bitcoin ETF, Grayscale’s fund fee is believed to be another factor that has triggered significant outflows that’s when it was recorded. For context, Grayscale’s fee was the highest of any Bitcoin ETF issuer. Therefore, potential outflows from the Grayscale Ethereum ETF could be minimally reduced if the asset manager makes it competitive on fees this time around.
Ethereum’s future trajectory remains hopeful
Kaiko suggested it Ether is sure to see significant price increases as other Ethereum Spot ETFs begin to see impressive inflows that could eclipse outflows from Grayscale’s ETHE. Something similar happened with Bitcoin, as Kaiko pointed out Grayscale GBTC Outflows were offset and exceeded by inflows from other Bitcoin ETFs by the end of January.
Thanks to the impressive demand these Bitcoin ETFs have seen, the flagship cryptocurrency has reached a fresh all-time record (ATH) in March this year. Ethereum ETFs could also trigger such an enhance in the ETH price depending on the size of inflows these funds record after they begin trading.
Meanwhile, Kaiko noted that even if the inflow of funds disappoints in the brief term, the mere approval of these funds already has “important implications for ETH as an asset” because it confirms that it is not a security. It helped to remove it regulatory uncertainty which has been affecting the price of Ethereum for some time.
Featured image from NewsBTC, chart from Tradingview.com
