The soon-to-be-launched Ethereum fund (ETF) could face significant outflows, potentially averaging about $110 million a day.
In a recent report, analyst firm Kaiko said the forecast is based on a pattern observed in the case of Grayscale-owned Bitcoin Trust (GBTC) when it converted from a closed-end fund to an ETF on January 11.
In the first month after the conversion, 23% of assets under management (AUM), with a total value of $6.5 billion, flowed out of GBTC.
Grayscale Ethereum ETF has $11 billion in AUM
The Ether Trust (ETHE) fund owned by Grayscale now has $11 billion in assets.
If it experiences similar outflows as GBTC, this could result in average daily outflows of $110 million, which is about 30% of the average daily Ether trading volume on Coinbase, Kaiko said.
Kaiko researchers stressed that it is reasonable to expect outflows or redemptions after switching to ETFs. A similar trend was observed for GBTC, whose discount to NAV decreased significantly after conversion to ETFs.
Prior to the conversion, its listing was trading at a discount of up to 17%, but this has gradually decreased over time, allowing investors to exit the fund at its initial price or higher. After the initial approval of Ether ETFs by the Securities and Exchange Commission on May 23, ETHE’s discount has already begun to narrow.
However, the ETF has not yet started trading as an ETF. Data from YCharts show that ETHE’s discount exceeded 25% on May 1, but gradually decreased over the course of the month amid speculation about potential SEC approval of Ether ETFs. By May 24, the discount had reached 1.28%.
Kaiko analysts also pointed out that in late January, GBTC outflows were exceeded by inflows into other Bitcoin ETFs.
They concluded that even if initial inflows into the ETFs disappoint in the short term, the approval itself has significant implications for Ether as an asset, removing some of the regulatory uncertainty that has weighed on its performance over the past year.
Ether ETF approval paves way for more crypto funds
The recent approval of Ethereum ETFs has opened the door for more cryptocurrency investment products, according to a study by TD Cowen’s Washington Research Group.
While the speed of the approval surprised some, the research group saw it as an inevitable outcome following the approval of Bitcoin ETFs earlier this year.
Jaret Seiberg, a member of the TD Cowen team, noted that the approval of Ethereum ETFs came about six months earlier than expected, but was predictable after the Securities and Exchange Commission (SEC) gave the green light to cryptocurrency ETF futures.
What’s more, according to industry experts, the approval of ETH ETFs potentially confirms Ether‘s status as a non-hedge company.
Bloomberg ETF analyst James Seyffart said that the approval of these commodity-based stocks means that the SEC clearly recognizes Ether as a non-security. Seyffart further suggested that this recognition could be extended to other tokens as well, reinforcing their classification as commodities.
