GET 10% OFF ON YOUR FIRST ORDER. FOR A LIMITED TIME ONLY. Use code: WELCOME on checkout
News

Grayscale Ethereum Trust Could Hamper ETH Price Surge with $110M Daily Outflows Starting July 4

Grayscale

  • Grayscale’s upcoming Ether ETF might see daily outflows of $110 million.
  • Ethereum Trust’s discount to NAV has narrowed ahead of the ETF launch.

Grayscale’s yet-to-launch spot Ether ETF could face substantial daily outflows if it mirrors the performance of its Bitcoin Trust conversion to an ETF. In recent research,  Kaiko analysts have estimated daily outflows at $110 million, which accounts for 30% of Ether’s average daily trading volume on Coinbase.

This projection is in line with the 23% asset outflow of Grayscale Bitcoin Trust (GBTC) in the first month after its conversion to the ETF back in January.

Potential Impact on the Ethereum Market

Grayscale Ethereum Trust (ETHE) currently has over $11 billion in assets under management. If the outflow rate of ETHE is to be similar to that of GBTC, then this implies that $110 million could be flowing out of the ETF daily. If this outflow materializes it could affect the overall Ethereum market, especially exchanges like Coinbase where this volume is traded.

The Grayscale Bitcoin Trust’s conversion to an ETF led to a 23% decline in its AUM in the first month with the asset base dropping to $6.5 billion from the initial $8.3 billion. This trend is expected to continue with the Ethereum Trust, thus resulting in a similar level of outflow. It could also have significant effects on Ethereum’s liquidity and the price stability, especially in the early period following the ETF launch.

Discount to NAV and Market Reactions

In the past three months, ETHE has been trading at a discount to its NAV with a maximum discount of 26%. This trend changed on May 23 when the SEC expressed some form of approval for spot Ether ETFs; the discount started to close and reached a 1.28% discount on May 24th. This is an indication that market players are moving their trades in preparation for the ETF in the market.

However, the discount of GBTC to NAV decreased notably after changing its structure to an ETF. Before the transition, GBTC was trading at a 17% discount, which opened up again, but many investors were able to exit at good prices. This shows that by May 24th, GBTC was trading at a slight 0.03% discount to NAV, and thus, the market had high confidence in the ETF structure.

Regulatory Developments and Market Stability

This approval of spot Ether ETFs by the SEC has ramifications for Ether to the extent that it is now being viewed as an asset. Lack of regulatory guidance has been a major concern among investors, and the launch of Ether ETFs has addressed this issue. The short-term reactions may be outflows, but the long-term effects will be positive for Ethereum: more legitimacy and fewer legal problems.

Similarly, the Grayscale Ethereum Trust has also changed its custodian arrangements and has appointed Coinbase as the new custodian for the Trust’s assets. This agreement supersedes the prior custodian agreement and takes effect at the opening bell of trading on NYSE Arca. Furthermore, BNY Mellon will also assume certain functions of the Trust as the Trust’s transfer agent, effective from the date of termination of the prior service agreement. As of this writing, Eth is currently trading at $3,748.67, registering a decline of 4%. 

Latest Press

post-thumbnail
News
50 mins ago
Thailand in Talks with Ripple for Potential XRP Integration
Ripple acknowledges Thailand’s potential adoption of XRP in a letter to Thai authorities. Ripple p...
READ MORE
default post thumbnail
News
50 mins ago
XRP Bears In Control: Understanding the Sustained Bearish Sentiment
XRP price struggled to recover above the $0.4880 resistance zone. The price is moving lower and the ...
READ MORE
default post thumbnail
News
50 mins ago
Ethereum Price Trims Gains as Bitcoin Slump Drags Crypto Market
Ethereum price struggled to climb above the $3,550 resistance and trimmed gains. ETH gained bearish ...
READ MORE
default post thumbnail
News
50 mins ago
LBank Exchange Will List DED (DED) on June 24, 2024
Road Town, BVI, June 24th, 2024, Chainwire In a significant move for cryptocurrency and mobile techn...
READ MORE
default post thumbnail
News
50 mins ago
Bitcoin Price Takes a Plunge: Analyzing the Sudden Drop
Bitcoin price started another decline after it struggled near $64,550. BTC declined below the $63,50...
READ MORE
default post thumbnail
News
50 mins ago
Top Analysts Predict When Altcoin Season Will Begin
Crypto enthusiasts and investors are eager to know when altcoin season will kick off. Top analysts o...
READ MORE
default post thumbnail
News
50 mins ago
Crypto on the Campaign Trail: Bitcoin and Blockchain Shapes the 2024 Presidential Race
As the 2024 US presidential election draws near, cryptocurrency has emerged as a surprising yet powe...
READ MORE
default post thumbnail
News
50 mins ago
Miners’ $2 Billion Sell-off Impacts Bitcoin Price, May Cause Second Negative Monthly Close
Bitcoin’s (BTC) price had rallied above $70,000 early this month amid a 19 consecutive inflow stre...
READ MORE
default post thumbnail
News
50 mins ago
Bitcoin Risk at Lowest Level Ever: Here’s Why
Once viewed as a speculative experiment, Bitcoin has matured into a secure and trusted digital asset...
READ MORE
post-thumbnail
News
50 mins ago
Dell Technologies CEO’s Bitcoin Tweets Ignite Crypto Community Speculation
Dell Technologies CEO Michael Dell has sparked a flurry of discussion and speculation within the cry...
READ MORE

Publish an article now

Unlock the power of media for instant visibility to the target audience, major SEO boost, greater website traffic and conversion rates.

click here to get started