A recent market report by research firm Kaiko noted how Grayscale’s Spot Ethereum ETF could have a negative impact on Ethereum’s (ETH) price. This is predicated on the firm’s expectations that Grayscale’s Ethereum Trust (ETHE) could follow the same path to Grayscale’s Bitcoin Trust (GBTC).

Ethereum Could Face Significant Selling Pressure From Grayscale’s Outflows

Kaiko noted that Ethereum could face significant selling pressure from Grayscale’s ETHE once the Spot Ethereum ETFs begin trading. It’s because the fund has been trading at a reduction between 6% and 26% over the past three months, with a wave of profit-taking prone to concur. It’s value mentioning that Grayscale’s ETHE has previously operated as a closed-end fund, with Grayscale simply applying to convert it to an exchange-traded fund (ETF). 

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The research firm noted that Grayscale’s ETHE has over $11 billion in assets under management (AuM). That implies that $110 million of every day average outflows could leave the fund if Grayscale’s Ethereum ETF sees the same magnitude of outflows to Grayscale’s Bitcoin ETF, whose $6.5 billion outflows in the primary month of trading amounted to 23% of the fund’s AuM. 

Grayscale’s Bitcoin Trust (GBTC) also operated in a similar way before it was converted to an ETF. That is believed to have contributed to the $6.5 billion outflows the fund recorded in the primary month of trading, with many investors taking profit since they purchased the fund at a reduction. Due to this fact, Kaiko expects that something similar could occur with Grayscale’s ETHE. 

The outflows that Grayscale’s Spot Bitcoin ETF is understood to have exerted significant selling pressure on Bitcoin’s price, causing the flagship crypto to say no significantly. As such, the identical thing could be expected with Ethereum’s price if Grayscale’s Spot Ethereum ETF suffers the same fate. 

Nevertheless, besides investors taking make the most of Grayscale’s Bitcoin ETF, Grayscale’s fund fee is believed to be one other factor that sparked the significant outflows it recorded back then. For context, Grayscale’s fee was the best amongst all of the Bitcoin ETF issuers. As such, the potential outflows from Grayscale’s Ethereum ETF may very well be minimally reduced if the asset manager makes it fee competitive this time around. 

Ethereum’s Future Trajectory Still Bullish

Kaiko suggested that Ethereum remains to be certain to make significant price gains once other Ethereum Spot ETFs begin to record impressive inflows that may overshadow the outflows from Grayscale’s ETHE. Something similar happened with Bitcoin, as Kaiko noted that Grayscale GBTC’s outflows were offset and surpassed by inflows from other Bitcoin ETFs by the top of January. 

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Because of the impressive demand that these Bitcoin ETFs recorded, the flagship crypto hit a recent all-time high (ATH) in March earlier this yr. The Ethereum ETFs could also trigger such a rally for ETH’s price depending on the quantity of inflows these funds record once they start trading. 

Meanwhile, Kaiko noted that even when the inflows disappoint within the short term, the mere approval of those funds already has “essential implications for ETH as an asset” because it confirms that it isn’t a security. This has helped remove the regulatory uncertainty that has weighed on Ethereum’s price for a while now. 

ETH price still above $3,800 | Source: ETHUSDT on Tradingview.com

Featured image from NewsBTC, chart from Tradingview.com