Kaiko: Grayscale Ethereum ETF to See Similar Fate Like GBTC Upon Launch

Amid all the development surrounding the approval of the spot Ethereum ETF last week, Kaiko Research has released a report stating what could happen if Grayscale manages to convert its Ethereum Trust (ETHE) into a spot Ether ETF.

As per Kaiko, the Grayscale fund ETHE could experience outflows to the tune of $110 million per day if it follows the same road as the Grayscale Bitcoin Trust GBTC. The Kaiko report notes that after the GBTc product converted into an ETF on January 11, it witnessed outflows with 23% of its assets under management, approximately $6.5 billion, eroding within the first month itself.

ETHE holds assets under management (AUM) totaling $11 billion. According to Kaiko, if ETHE experiences outflows similar in magnitude to those of GBTC, this could result in $110 million of average daily outflows. This amount represents 30% of Ethereum’s average daily trading volume on Coinbase.

In the past three months, the Grayscale Ethereum Trust ETHE has been trading at a 26% discount to its net asset value (NAV). Thus, as per Kaiko, if this product translates into a spot Ether ETF, it is very likely to witness outflows.

The discount to NAV for GBTC, which indicates how much it traded below the value of the fund’s holdings, significantly narrowed following its conversion to an ETF. Before the conversion, GBTC traded at a discount of up to 17%. Over time, this discount has reduced, enabling many holders to exit GBTC at either the same price they entered or at a profit.

In its colluding comments on ETHE, Kaiko stated that even if Ether ETF inflows “disappoint in the short term the approval has important implications for ETH as an asset, removing some of the regulatory uncertainty which has weighed on ETH’s performance over the past year.”

Spot Ethereum ETF Approval to Boost ETH Price

In its research report, Kaiko noted that the approval of the spot Ethereum ETF will certainly boost the ETH price in the long term. Kaiko underscores that this development eliminates a significant portion of the regulatory uncertainty surrounding Ethereum’s classification, paving the way for its sustained long-term growth.

Will Cai, Head of Indices at Kaiko, commented on the implications of the SEC’s decision, highlighting a pivotal shift in how Ethereum is viewed by regulatory bodies. “The SEC’s approval is a clear indication that Ethereum is treated as a commodity rather than a security,” he stated.