Grayscale Ethereum ETF Could Suffer $110M Daily Losses: Kaiko Report

Analysts warn of potential Ethereum ETF outflows mirroring Bitcoin's, raising concerns despite initial price boost.
Crypto Market Tumbles Despite Ethereum ETF Approval

Key Insights

  • Analysts from Kaiko have predicted that Grayscale's Ethereum ETF (ETHE) might suffer significant daily outflows, similar to its Bitcoin ETF.

  • After converting to an ETF, GBTC lost 23% of its assets under management ($6.5 billion) within a month.

  • Kaiko estimates that the outflows from the Ethereum ETF might be about $110 million every day, which is about 30% of Ethereum's daily trading volume on Coinbase.

  • Initial inflows might do something to help Ethereum prices. However, the threat of these outflows remains real

Things didn’t turn out too well for Grayscale Investments, when it converted its GBTC transitioned to an ETF and launched with the 10 others on 11 January.

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For the first few weeks after launch, while the other ETFs experienced inflows worth Billions, Grayscale experienced millions of dollars in outflows, putting significant bearish pressure on Bitcoin.

This time, we have new Ethereum ETFs approved by the SEC once again, and analysts at Kaiko seem to believe that Grayscale’s Ethereum ETF (the $ETHE) might suffer the same fate as the GBTC.

What Happened With the GBTC?

When Grayscale converted the GBTC into an ETF and got approved for trading on 11 January, the rest of the ETF market raked in billions in a matter of weeks.

The GBTC on the other hand, lost around 23% of its assets under management within the first month of trading—all of which Kaiko calculates to be worth a staggering $6.5 billion.

Per Kaiko's calculation, if something similar happens with the new Grayscale Ethereum ETF (the $ETHE) we might be seeing outflows worth an average of  $110 million—every single day.

“GBTC’s outflows during the first month of trading for bitcoin ETFs amounted to $6.5 billion, which is roughly 23% of its AUM as of launch day.

Should we see a similar magnitude of outflows from ETHE, this would amount to $110 million of average daily outflows or 30% of ETH’s average daily volume on Coinbase”

The bearish pressure this outcome might put on Ethereum might be unprecedented.

Kaiko's analyst also reports that over the last three months, Grayscale’s ETHE has been trading at a discount to its net asset value.

This means that if this ETF becomes operational, these outflows are almost guaranteed as this discount shortens, just as we saw with the GBTC after the ETF conversion.

An Inescapable Future?

Kaiko recalls that the GBTC used to trade at a discount of around 17% before narrowing over time.

This allowed many of the initial GBTC holders to exit either at the same price they entered or even at a profit.

We are seeing something similar with the ETHE’s discount, which has already begun to narrow since the SEC's approval of the 8 Ethereum ETF applications on 23 May.

Although the net asset value of the ETHE used to trade at around 25% earlier in the month, it has crashed down to a discount of 1.28% as of 24 May, suggesting that investors may have growing confidence In the ETFs prospects after all.

Overall, while the initial flows into these ETFs might do a lot to boost the price of Ethereum in the short term, the threat of these massive outflows from Grayscale’s ETHE remains active, and investors might want to keep an eye out for the launch and performance of these ETFs.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.

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