Grayscale’s Ether exchange-traded fund (ETF) has recently gained approval from the U.S. Securities and Exchange Commission, sparking speculation about the potential impact on market outflows. A recent report by Kaiko suggests that if the trend set by Grayscale’s Bitcoin Trust is any indication, the Ether ETF could see an average outflow of $110 million per day.
The transition of Grayscale’s Bitcoin Trust to an ETF resulted in a 23% outflow of its assets under management (AUM) in the first month, amounting to $6.5 billion. With Grayscale’s Ether Trust (ETHE) currently holding an AUM of $11 billion, analysts project that similar outflows could lead to an average daily outflow of $110 million, representing 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). Kaiko researchers suggest that the transition to a spot ETF could narrow this discount, potentially triggering outflows or redemptions as investors seek to capitalize on the narrowing spread.
The approval of spot Ether ETFs by the SEC signals a positive shift in the agency’s view of the underlying asset as a commodity rather than a security. Will Cai, Head of Indices at Kaiko, noted that this decision has significant implications for regulating similar tokens in the U.S., particularly concerning trading, custody, and transfer. The likelihood of SEC approval was further bolstered after issuers amended their filings to exclude staking, increasing approval odds from 25% to 75%.
Despite growing uncertainty surrounding ETH’s regulatory status, the market has gradually discounted the possibility of an ETF approval. Grayscale’s Ether Trust discount has narrowed since the SEC’s announcement, signaling a positive shift in market sentiment towards the asset. While ETHE has yet to begin trading as a spot ETF, the narrowing discount indicates growing investor confidence in the approval’s implications.
The approval of Grayscale’s Ether ETF has the potential to significantly impact market outflows, with projections indicating substantial daily outflows. As the market adjusts to the transition to a spot ETF and the narrowing discount, investors may seek to capitalize on the changing landscape. The approval signals a positive shift in regulatory sentiment towards ETH, potentially reshaping market dynamics and investor perception of the asset.