In a surprising turn of events, the U.S. Securities and Exchange Commission (SEC) gave its approval to eight spot Ethereum ETF funds on May 23, sparking a wave of optimism. However, what was even more surprising was the lack of reaction from Ethereum’s price in response to this news. Despite the SEC’s announcement, Ethereum’s price only experienced a modest increase from $3,742 to $3,859 by May 28.
Leading up to the approval, Ethereum’s value had already risen by nearly one-third. However, concerns about the possibility of the SEC reversing its decision had a significant impact on price movement, particularly with regards to Grayscale’s Ethereum Trust (ETHE), which holds $11 billion in assets. This concern stemmed from the fact that Grayscale’s Bitcoin Trust (GBTC) had experienced substantial outflows for several months following the approval of spot Bitcoin ETF funds. In fact, GBTC saw a total outflow of $6.5 billion, which accounted for 23% of its assets under management (AUM).
In light of this, Kaiko Research estimated in a report on May 27 that ETHE could experience an average daily outflow of $110 million, assuming history repeats itself. Toni Mateos, co-founder of LAOS Network, a platform that allows for asset creation on Ethereum Virtual Machine compatible chains, shares this sentiment and predicts significant outflows from ETHE. However, Mateos also notes an important distinction between GBTC and ETHE. While GBTC held around $30 billion worth of Bitcoin at the time of approval, which represented 3.5% of Bitcoin’s market value, ETHE only holds $11 billion worth of Ethereum, representing 2.2% of the market value.
As always, it’s important to note that the information provided in this article should not be viewed as investment advice. Investors should recognize the high volatility and associated risks of cryptocurrencies and conduct their own research before making any decisions.
