As an experienced financial analyst, I believe that Kaiko’s market report raises valid concerns about the potential impact of Grayscale’s Ethereum ETF on Ethereum’s price. Based on historical data from Grayscale’s Bitcoin Trust, there is a likelihood of significant selling pressure if the fund experiences outflows similar to those seen in the Bitcoin Trust.
A market analysis conducted by research company Kaiko revealed that the introduction of Grayscale’s Spot Ethereum Exchange-Traded Fund (ETF) might potentially lead to a decrease in Ethereum’s (ETH) value. This assumption is rooted in Kaiko’s belief that Grayscale’s Ethereum Trust (ETHE) could mimic the price behavior of Grayscale’s Bitcoin Trust (GBTC).
Ethereum Could Face Significant Selling Pressure From Grayscale’s Outflows
Kaiko pointed out that Ethereum might experience substantial selling pressure upon the commencement of trading for Spot Ethereum ETFs, due to Grayscale’s ETHE. The reason being, during the past three months, this fund has been trading at a discount ranging from 6% to 26%. As a result, investors may choose to sell their shares in Grayscale’s ETHE to realize profits, potentially leading to increased supply and downward pressure on Ethereum prices. It is noteworthy that until now, Grayscale’s ETHE functioned as a closed-end fund; however, the company has applied for its conversion into an exchange-traded fund (ETF).
A research firm pointed out that Grayscale’s Ethereum trust (ETHE) currently manages over $11 billion in assets. If Grayscale’s Ethereum ETF experiences outflows similar to those seen with their Bitcoin ETF during its first month of trading, which totaled $6.5 billion and represented approximately 23% of the fund’s assets, then ETHE could experience daily outflows of around $110 million.
As an analyst, I’ve noticed that Grayscale’s Bitcoin Trust (GBTC) experienced significant outflows worth $6.5 billion in the first month of trading following its conversion to an Exchange-Traded Fund (ETF). This mass exit of investors is believed to have been driven by the fact that they had purchased the fund at a discount before the conversion. Given this precedent, I anticipate that Grayscale’s Ethereum Trust (ETH) could experience similar outflows when it eventually converts to an ETF.
If Grayscale’s Spot Bitcoin ETF puts heavy selling forces on Bitcoin’s market, resulting in a substantial price drop, then it’s reasonable to anticipate that the same impact could occur for Ethereum if Grayscale’s Spot Ethereum ETF experiences similar issues.
Despite investors cashing in on Grayscale’s Bitcoin ETF, high fees charged by Grayscale are thought to have contributed significantly to the large withdrawals observed earlier. To clarify, Grayscale’s fee was the most expensive among all Bitcoin ETF providers. Consequently, Grayscale could potentially minimize outflows from its Ethereum ETF if it sets a more competitive fee for this product.
Ethereum’s Future Trajectory Still Bullish
Kaiko proposed that Ethereum’s value could still experience notable price increases once other Ethereum Spot Exchange-Traded Funds (ETFs) experience substantial inflows, outweighing the outflows from Grayscale’s ETHE. A comparable occurrence took place with Bitcoin, as Kaiko mentioned that Grayscale GBTC’s outflows were eventually surpassed by inflows into other Bitcoin ETFs towards the end of January.
As an analyst, I’ve observed a significant surge in demand for Bitcoin and Ethereum Exchange-Traded Funds (ETFs) lately. Consequently, Bitcoin reached a new peak price, setting a fresh all-time high (ATH), in March this year. Similarly, the debut of Ethereum ETFs could potentially ignite a similar price rally for Ethereum, contingent upon the volume of inflows these funds attract upon their launch.
During this period, Kaiko pointed out that while the anticipated inflows may fall short in the near future, the simple fact of these funds being given the green light holds significant meaning for Ethereum as a valuable asset. This determination eliminates the regulatory doubt that has long hindered Ethereum’s price growth.
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2024-05-29 01:16