Grayscale Outflows Threaten Ethereum ETF Launch
The U.S. Securities and Exchange Commission (SEC) unexpectedly approved eight spot Ethereum ETFs on May 23, which initially generated a wave of optimism in the market. Surprisingly, the price of Ether (ETH) showed minimal reaction to this news. Prior to the SEC’s announcement, the price of Ether stood at $3,742.31, rising to $3,959.28 by May 27, only to fall again to $3,859.39 the following day. This indicates that a consistent bullish trend has yet to take hold.
Leading up to the ETF approvals, Ether’s price had increased by roughly one-third. But worries about the SEC possibly reversing its decision and concerns related to Grayscale’s Ethereum Trust (ETHE), which manages $11 billion, became significant factors affecting its price trajectory. The market was already wary due to months of substantial outflows from the Grayscale Bitcoin Trust (GBTC) despite considerable inflows. GBTC experienced $6.5 billion in outflows—a whopping 23% of its assets—within a month of spot Bitcoin ETFs receiving approval.
Kaiko Research projected that average daily outflows from ETHE could amount to $110 million, assuming history repeats itself. Toni Mateos, co-founder of the LAOS Network, also foresees major capital moving from ETHE to the new ETFs due to the latter’s superior liquidity, narrower spreads, and lower fees. According to Mateos, these ETFs have a broader market appeal due to lower entry barriers.
Mateos pointed out that while there are similarities between GBTC and ETHE, there’s a key difference: the relative size of these Grayscale products in their respective markets. When spot Bitcoin ETFs were approved, GBTC held nearly $30 billion in Bitcoin, making up 3.5% of Bitcoin’s market cap. By contrast, ETHE manages $11 billion in Ether, representing only 2.2% of Ether’s market cap. Thus, Mateos suggests the ETFs’ impact on Ethereum could be proportionally larger yet more stable due to lesser outflows.
Despite potential short-term outflows, Mateos believes the long-term outlook is promising if ETH ETF adoption leads to a continuous influx of funds, driving prices higher. Ethereum’s proof-of-stake model, unlike Bitcoin’s proof-of-work, emits significantly fewer carbon emissions, making it attractive to Environmental, Social, and Governance (ESG) focused investors. This could even impact BTC ETFs as climate-conscious investors might prefer ETH ETFs for their crypto market exposure.
Kurt Hemecker, CEO of the Mina Foundation, also emphasized Ethereum’s environmental benefits for long-term positivity. For mainstream and institutional investors, the ESG advantages of a spot ETH ETF make it a compelling addition to their portfolios. This sentiment contributes to the optimistic long-term outlook for the ETF and Ethereum in general.
Other experts suggest that ETHE outflows might be mitigated by several factors. Chief among these is the historic low supply of Ethereum on exchanges, which could limit sell-side liquidity and thereby cushion the price against significant drops. James Toledano, COO of Savl, suggested that this limited supply acts as a natural price stabilizer.
Manthan Dave, co-founder of digital asset custodian Palisade, agrees. He believes that as long-term investors move Ethereum to private wallets or staking, this reflects a bullish market sentiment. Ethereum’s market behavior is influenced by many factors beyond just exchange supply levels, making its dynamics complex. Mechanisms like transaction fee burning and staking under Ethereum 2.0 further limit the available supply, offsetting some selling pressures and potentially stabilizing prices.
In addition to these internal factors, Kris Kay from the DeFi Donut YouTube channel pointed out the deflationary nature of Ethereum’s slow issuance rate, suggesting that funds flowing into ETH ETFs could result in significant price appreciation compared to BTC ETFs. The London Stock Exchange’s upcoming listing of ETPs, following FCA’s approval, adds to the global momentum for Ethereum.
The approval of spot Ethereum ETFs has generated positive market sentiment. Jess Houlgrave, CEO of WalletConnect, believes the ETF approval boosts industry confidence and broadens Ethereum’s potential buyer base, combined with positive headwinds for Ethereum. This optimism is shared by Oleg Fomenko, co-founder of Sweat Economy, who predicted that institutional money flowing through the approved ETFs could push ETH prices up to $7,000 within the next three months.
41 thoughts on “Grayscale Outflows Threaten Ethereum ETF Launch”
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This will surely attract more institutional investors! Ethereum ETFs could push ETH prices to new heights!
The SEC finally approves some ETFs, and ETH can’t even hold its gains. Feels like a wasted opportunity.
SEC’s approval was supposed to be a game-changer, but Ethereum’s anemic price response is just sad.
SEC greenlighting ETH ETFs is music to my ears! Looking forward to Ethereum’s bright future! 🎶💰
The SEC approval seemed like it would bring a huge boost, but nope, ETH is practically stagnant. What a disappointment.
With all the positive buzz surrounding these ETF approvals, ETH still dipped the day after. What a joke.
It’s frustrating to see barely any price action despite the ETF approval. Is this really going to make a difference long-term? 🤔❓
The market needed some good news, and the SEC delivered! Long live ETH ETFs!
ETH ETF approval is here, and Im super bullish on ETHs long-term potential! Thanks, SEC!
Wonderful news for Ethereum! The ETF approval is a textbook example of positive market sentiment! 🌟📈
Finally, the SEC is moving forward with Ethereum ETFs! This is a huge step for the crypto market!
Amazing news about the Ethereum ETFs approval! Can’t wait to see what the future holds for ETH
ETH’s price action is so underwhelming right now. Expected more from the ETF news but here we are, stuck.
Ethereum ETFs approved! This will definitely attract mainstream investors!
The minimal reaction from ETH to this big news just makes me question the effectiveness of these ETFs. What gives?
All this talk of ETFs making ETH soar to new heights is just hot air. The price movement says it allbig whoop.
The SEC approving eight spot Ethereum ETFs is a game-changer! The sky’s the limit for ETH now!
Seeing the progress Ethereum is making, it’s reassuring to have these ETFs approved!
Big congrats to the Ethereum community! The ETF approval is a hallmark moment!
Thrilled about the SEC’s decision to approve ETH ETFs! Excited to see the positive ripple effect on the market!
Can’t wait to see how this impacts the long-term value! ETH ETFs will be a magnet for ESG investors! 💵🌐
Ethereum ETFs are finally here! This is fantastic news for both investors and the crypto market at large!
This is exactly what Ethereum needed! ETFs can bring in significant funds and stabilize the price! 💪📊
Honestly, the approval of these ETFs is overrated. If ETH can’t sustain a positive trend with this news, what’s the point?
This is just the beginning! Very excited to see how the market embraces ETH ETFs!
The stability brought by ETFs coupled with Ethereums proof-of-stake will be a fantastic combo!
Every hearing about these ETFs leading to a price surge, but ETH can’t even hold a gain. Underwhelming to say the least. 😕🚫
So the SEC approved the ETFs and ETH couldn’t even sustain a bullish trend? That’s just sad.
Huge progress for the crypto world! SEC approval of Ethereum ETFs opens up exciting possibilities! 🚀💡
Cheers to all of us ETH holders! The ETF approval is fantastic and looks promising for the future! 🎉🍾
I can’t believe the SEC approved these ETFs, and yet the ETH price barely moved. What a letdown.
So much hype for nothing. All this optimism and barely any price change makes me question if these ETFs will have any real impact.
Just wow! SEC giving the green light to Ethereum ETFs is a huge win for the whole industry!
Here’s to a greener and more valuable Ethereum! ETF approval shows the SEC’s trust in ETH! 🌱💎
Amazing to see SEC’s faith in Ethereum! ETFs will provide solid liquidity and stability!
All the optimism went down the drain as ETH showed minimal response to the ETF news. Really disappointing.
The way ETH’s price barely reacted to such significant news is a huge disappointment. Expected more market excitement. 😢📉
This is incredible! The Ethereum ETFs approval is just what we needed to boost market confidence!
Wow, the SEC surprised us with this bold move! This could be the start of something big for Ethereum! 🚀🌕
With ETFs now approved, Ethereum is set to soar to new highs! This is so exciting! 🚀💥
So happy to see ETH ETF approvals! This definitely broadens Ethereum’s buyer base and boosts industry confidence!