Grayscale Ethereum Trust (ETHE) outflows may dampen the Spot Ethereum ETF approval celebration, but they may also present traders with substantial opportunities
The U.S. Securities and Exchange Commission (SEC) unexpectedly authorized eight spot Ethereum ETFs on May 23, sparking an upswing in investor confidence.
However, what may be even more unexpected is the Ether ETH
$3,80 the price responded minimally to the news.
Before the May 23 SEC announcement, Ether was valued at $3,742.31. On May 27, it increased to $3,959.28; on May 28, it declined to $3859.39. As of yet, no sustained bull run has materialized.
Ahead of the approval, the value of Ether had increased by approximately 33%. The price action was significantly impacted by concerns regarding Grayscale’s Ethereum Trust (ETHE), which administers $11 billion in funds, following rumors that the SEC might reverse its decision.
Following months of substantial outflows from the Grayscale Bitcoin Trust (GBTC), which counterbalanced the impact of considerable inflows, the likelihood of a recurrence has become a source of concern for the markets.
A month after the authorization of spot Bitcoin ETFs, GBTC experienced outflows totaling $6.5 billion, or 23% of its assets under management (AUM).
According to a report published on May 27 by Kaiko Research, daily average outflows from ETHE would equate to $110 million if past trends are any indication.
Industry Anticipations
Significant outflows from ETHE are predicted by Toni Mateos, co-founder of LAOS Network, a layer-1 platform that facilitates asset creation on Ethereum Virtual Machine-compatible chains.
Mateos told Cointelegraph that “significant outflows from Grayscale Ethereum Trust to the new ETF are anticipated due to the ETF’s increased liquidity, narrower spreads, and lower fees.” In contrast to ETHE, the ETF encompasses a broader market segment due to its reduced entry barriers and fees.
While Mateos identifies certain parallels between ETHE and GBTC, he also highlights a significant distinction in the relative market significance of these Grayscale products.
As of the approval of spot Bitcoin ETFs, GBTC held approximately $30 billion worth of Bitcoin BTC
$68,194
equivalent to 3.5% of the BTC market capitalization. However, ETHE’s Ether holdings are only $11 billion, or 2.2% of the market capitalization.
Mateos stated, “Considering the smaller market capitalization percentage of ETHE, the impact of the ETF should be proportionally greater than that of BTC, as outflows from ETHE to the new ETFs should be more constrained.”
However, Mateos argues that despite temporary outflows, the outlook for the long run should be optimistic.