Grayscale’s upcoming Ether (ETH) exchange-traded fund (ETF) could experience significant outflows, potentially losing around $110 million per day during its initial month of operation, based on the pattern observed with its Grayscale Bitcoin Trust (GBTC), according to analysts at Kaiko. The GBTC, which transitioned from a closed-end fund to an ETF on January 11, saw 23% of its assets under management leave in the first month, amounting to $6.5 billion. With an asset under management (AUM) of $11 billion, if the ETHE experiences a similar level of outflows as the GBTC, it could result in average daily outflows of $110 million, equivalent to 30% of ETH’s average daily volume on Coinbase.
Over the past three months, the ETHE has traded at a discount of up to 26% compared to its net asset value (NAV). The Kaiko researchers predict that once it becomes a spot ETF, there will likely be outflows or redemptions as this discount narrows. The GBTC experienced a significant narrowing of its discount to NAV after converting to an ETF. It previously traded at a discount of up to 17%, but this has gradually reduced over time, allowing many investors to exit the GBTC at the same or better prices. According to YCharts, as of May 24, the GBTC is currently at a discount of 0.03%, which has been relatively stable since then.
The ETHE’s discount has also narrowed since the Securities and Exchange Commission (SEC) provided initial approval for spot Ether ETFs on May 23. However, the ETHE has yet to commence trading as a spot ETF. In May, the ETHE traded at a discount of over 25%, which gradually decreased throughout the month as speculation grew regarding the SEC’s approval of spot Ether ETFs. On May 24, it reached a discount of 1.28%, according to YCharts data.
Kaiko analysts also highlighted that while the GBTC experienced outflows, other Bitcoin ETFs saw inflows surpassing those outflows by the end of January. Consequently, Kaiko concluded that even if Ether ETF inflows are initially disappointing, the approval of such ETFs holds significant implications for ETH as an asset. It removes some of the regulatory uncertainty that has negatively impacted ETH’s performance over the past year.