As a surprise to the markets, the U.S. Securities and Exchange Commission (SEC) approved eight spot Ethereum ETF funds on May 23, leading to a positive optimistic process. However, perhaps even more surprising was Ethereum’s price showing little reaction to this news. Before the SEC’s announcement on May 23, Ethereum’s price was $3,742 and it could only rise to $3,859 by May 28.
What is Happening on the Ethereum Front?
In the days before the approval, Ethereum’s value had increased by almost one-third. However, after indications emerged that the SEC could reverse its decision, concerns about Grayscale’s $11 billion Ethereum Trust (ETHE) became a significant factor affecting price movement.
Balancing the effects of significant inflows, Grayscale observed substantial outflows from its Bitcoin Trust (GBTC) for months, and now markets are worried about a possible repetition. In the month following the approval of spot Bitcoin ETF funds, GBTC saw an outflow of $6.5 billion, equivalent to 23% of its assets under management (AUM).
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AAPLKaiko Research prepared a report on May 27 estimating that if history repeats itself, the average daily outflow from ETHE would be $110 million.
Famous Figure Comments on Ethereum
Toni Mateos, co-founder of LAOS Network, a Layer-1 platform enabling asset creation on Ethereum Virtual Machine compatible chains, also predicts significant outflows from ETHE. Mateos commented:
“Due to the high liquidity and low fees of ETF funds, significant outflows from Grayscale Ethereum Trust to the new ETF are expected. The ETF targets a broader market due to lower entry barriers and fees.”
Mateos sees similarities between GBTC and ETHE but also highlights a significant difference in the importance of these Grayscale products for their respective markets. When spot Bitcoin ETF funds were approved, GBTC held around $30 billion worth of Bitcoin, representing 3.5% of Bitcoin’s market value, but ETHE only holds $11 billion worth of Ethereum, representing 2.2% of the market value. Mateos stated:
“Given ETHE’s smaller market value percentage, outflows from ETHE to new ETFs should be more limited, making the ETF’s impact proportionally greater than what was experienced on the Bitcoin side.”
