[{"category":{"name":"Trending News","exported_url":"trending-news"},"id":"0559ad48-4482-42f4-8e3a-a06ac9741eb7","updated_at":"2024-05-28T07:09:00.105+00:00","account":{"firstName":"Mason","lastName":"Thompson"},"description":"Grayscale's launch of an Ethereum ETF could face early outflows due to a narrowing discount, mirroring its Bitcoin ETF. However, the SEC's approval removes regulatory uncertainty, potentially benefiting Ethereum in the long run.","sapo":"Grayscale's launch of an Ethereum ETF could face early outflows due to a narrowing discount, mirroring its Bitcoin ETF. However, the SEC's approval removes regulatory uncertainty, potentially benefiting Ethereum in the long run.","title":"Ethereum ETF Launch: Potential Turbulence But Long-Term Promise","content":"

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Grayscale's upcoming Ethereum ETF could face some initial instability. Analysts at Kaiko predict potential daily losses averaging $110 million in its first month if it mimics Grayscale's Bitcoin ETF launch. This stems from the possibility of investors redeeming shares when the discount between the ETF's price and the underlying Ethereum value narrows.

The concern arises from Grayscale's Bitcoin ETF experience. In January, upon converting to a standard ETF, it witnessed a significant outflow – 23% of its assets. This historical data raises red flags for the Ethereum ETF, currently trading at a discount.

However, there could be a positive sign that the approval of spot Ether ETFs has effectively pulled off a regulatory overhang that has probably been dragging on Ethereum’s price. It could prove constructive for Ethereum in the long run, although the ETF may face some challenges initially. Also, if there are any redemptions from the Ethereum ETF, the equality might be offset by investors contributing to existing Bitcoin ETFs.

The crux of the issue lies in Grayscale's Ethereum trust (ETHE) and its Asset Under Management (AUM) of $11 billion. If it experiences a similar outflow percentage (30% of ETHE's daily trading volume on Coinbase) as the Bitcoin ETF, it translates to an average daily loss of $110 million. This outflow is linked to the expectation that the discount on ETHE will shrink once it becomes a spot ETF, incentivizing investors to redeem shares at a more favorable price.

Grayscale Bitcoin Trust (GBTC)

Source: Coindesk

Just like Grayscale's Bitcoin ETF (GBTC), which traded at a discount as high as 17% before conversion, ETHE's discount has already begun to shrink in anticipation of the SEC's approval. However, post-conversion, GBTC's discount narrowed significantly, allowing many holders to exit at a profit or at least break even.

Grayscale's Bitcoin Trust (GBTC), launched in 2013, is one of the first vehicles allowing US investors exposure to Bitcoin. Though often referred to as an ETF, it's technically a trust that holds actual Bitcoin, and its share price reflects the underlying Bitcoin price minus trust fees. Despite not being a true ETF, GBTC has become a popular way to invest in Bitcoin through a traditional investment account.

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Ethereum ETF Launch: Potential Turbulence But Long-Term Promise

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