- Kaiko analysts predict significant daily outflows for Grayscale's Ethereum ETF (ETHE), similar to the Bitcoin ETF.
- After converting to an ETF, Grayscale Bitcoin Trust (GBTC) lost 23% of its assets under management ($6.5 billion) in one month.
- Kaiko estimates daily outflows for the Ethereum ETF to be around $110 million, approximately 30% of Ethereum's daily trading volume on Coinbase.
- Initial inflows might support Ethereum prices temporarily, but the risk of substantial outflows persists.
Grayscale Investments faced significant challenges when it transitioned its GBTC to an ETF and launched alongside ten other ETFs on January 11. Unlike the others that saw inflows worth billions, Grayscale experienced outflows amounting to millions of dollars in the initial weeks, exerting considerable bearish pressure on Bitcoin.
Now, with new Ethereum ETFs approved by the SEC, analysts at Kaiko are concerned that Grayscale's Ethereum ETF ($ETHE) might encounter similar difficulties as the GBTC. When Grayscale's GBTC was converted into an ETF and began trading on January 11, the overall ETF market saw billions in inflows within weeks. In contrast, GBTC lost approximately 23% of its assets under management within the first month, equating to a staggering $6.5 billion.
Kaiko estimates that if the same scenario unfolds for Grayscale’s Ethereum ETF, the average daily outflows could reach $110 million, which is around 30% of Ethereum's average daily volume on Coinbase. Such significant outflows could exert unprecedented bearish pressure on Ethereum. Kaiko's analysts also note that over the past three months, Grayscale’s ETHE has been trading at a discount to its net asset value (NAV). This pattern suggests that outflows might be inevitable if the ETF becomes operational and the discount narrows, mirroring the GBTC's performance post-ETF conversion.
Previously, GBTC traded at a discount of about 17%, which gradually narrowed, allowing many initial holders to exit at break-even or with profits. A similar trend is emerging with ETHE, whose discount has narrowed from around 25% earlier in the month to just 1.28% as of May 24, reflecting growing investor confidence following the SEC's approval of eight Ethereum ETF applications on May 23.
While the launch of these ETFs might initially boost Ethereum's price, the potential for substantial outflows from Grayscale's ETHE remains a significant risk. Investors should closely monitor the launch and subsequent performance of these ETFs.
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