The Potential Impact of Grayscale’s Ether ETF Approval on Market Outflows

Recently, Grayscale’s upcoming spot Ether exchange-traded fund (ETF) has been making headlines with predictions of significant outflows in the market. An analysis by Kaiko suggests that if the trend set by the company’s Bitcoin Trust is followed, there could be an average outflow of $110 million per day.

SEC Approval of Spot Ether ETFs

The U.S. Securities and Exchange Commission recently approved spot Ether ETFs, paving the way for Grayscale to transition its Ether Trust (ETHE) from a closed-end fund to an ETF. This approval has significant implications for the market, as it signals a shift in how the SEC views Ether as a commodity rather than a security.

Potential Outflows and Impact on Market Sentiment

Kaiko’s report highlights the possibility of outflows in the market once ETHE transitions to a spot ETF. With an AUM of $11 billion, similar to the Grayscale Bitcoin Trust (GBTC), the potential outflows could average $110 million per day. This represents 30% of ETH’s average daily volume on Coinbase.

Over the past three months, Grayscale’s ETHE has traded at a discount of up to 26% to its net asset value (NAV). The narrowing of this discount following the SEC approval of spot Ether ETFs on May 23 indicates a shift in market sentiment. However, uncertainty about ETH’s regulatory status has led to growing skepticism about the future of Ether ETFs.

The likelihood of SEC approval for spot Ether ETFs has increased in recent weeks, with Bloomberg raising the odds from 25% to 75% on May 20. While the approval is seen as significant for ETH, the market remains cautious about the potential impact on outflows and redemptions once ETHE begins trading as a spot ETF.

The approval of Grayscale’s Ether ETF and the transition to a spot ETF has sparked discussions about potential outflows in the market. While the impact on market sentiment remains uncertain, the approval signals a positive shift in how regulatory bodies view Ether as a commodity. As the market continues to react to these developments, it is essential for investors to stay informed and cautious about potential risks and opportunities in the market.