Grayscale’s Potential Ether ETF Could See $110M Daily Outflows in Initial Month: Kaiko Analysis

Grayscale’s proposed spot Ether ETF might face significant daily outflows similar to those experienced by its Bitcoin ETF, potentially putting short-term downward pressure on ETH prices.

According to a report by Kaiko on May 27, if Grayscale’s forthcoming Ether ETF mirrors the initial performance of its Bitcoin counterpart, the Grayscale Bitcoin Trust (GBTC), it could see an average of $110 million leaving daily in the first month. When GBTC transitioned from a closed-end fund to an ETF on January 11, it experienced a 23% reduction in assets under management, totaling a $6.5 billion outflow.

The Ether ETF, known as ETHE, currently holds an assets under management (AUM) total of $11 billion. Kaiko analysts suggest that if ETHE encounters outflows similar to GBTC, it could represent $110 million in average daily outflows, equating to 30% of ETH’s average daily trading volume on Coinbase.

Over the past three months, ETHE has traded at a discount of up to 26% compared to its net asset value (NAV). The report suggests that this discount might decrease as the fund transitions to an ETF, potentially prompting investors to redeem their shares as the price gap narrows.

Historically, the discount to NAV for GBTC has significantly reduced post-conversion. Before becoming an ETF, GBTC traded at up to a 17% discount but this gap has since narrowed, allowing investors to exit at break-even or better prices.

As of May 24, YCharts data shows GBTC’s discount has stabilized around 0.03%. Similarly, ETHE’s discount has been narrowing since the Securities and Exchange Commission’s preliminary approval of spot Ether ETFs on May 23. By May 24, the discount had tightened from over 25% at the beginning of the month to 1.28%.

Kaiko also observed that while GBTC saw substantial outflows, they were offset by inflows into other Bitcoin ETFs by the end of January.

The analysts concluded that while short-term inflows into the Ether ETF might underwhelm, the regulatory approval could bolster ETH’s market position by alleviating some of the regulatory uncertainties that have impacted its performance over the past year.