Kaiko analysts predict that Grayscale's upcoming spot Ether ETF could experience daily outflows averaging $110 million in its first month, mirroring the pattern observed with the Grayscale Bitcoin Trust.

Grayscale's soon-to-be-launched spot Ether exchange-traded fund (ETF) might face substantial short-term pressure on the price of Ether (ETH), according to a recent report by Kaiko analysts. The report suggests that if the Ether ETF follows a similar trajectory to the Grayscale Bitcoin Trust (GBTC), it could see average daily outflows of $110 million in its first month.

When GBTC transitioned from a closed-end fund to an ETF on January 11, it experienced significant outflows, with 23% of its assets under management (AUM) exiting in the first month, amounting to $6.5 billion. If Grayscale’s Ether ETF, which currently has an AUM of $11 billion, encounters outflows of a similar magnitude, it could result in an average daily outflow of $110 million. This figure represents 30% of ETH's average daily trading volume on Coinbase, Kaiko analysts noted in their May 27 report.

In the past three months, Grayscale’s Ether Trust (ETHE) traded at a discount of up to 26% to its net asset value (NAV). Kaiko researchers anticipate that once ETHE converts to a spot ETF, it is "reasonable to expect" outflows or redemptions as the discount to NAV narrows. Historically, GBTC's discount to NAV significantly narrowed following its conversion to an ETF, moving from up to a 17% discount before conversion to around a 0.03% discount by May 24, as reported by YCharts.

ETHE's discount has already begun to narrow since the U.S. Securities and Exchange Commission (SEC) indicated initial approval for spot Ether ETFs on May 23. Before this development, ETHE traded at over a 25% discount on May 1 but narrowed to a 1.28% discount by May 24 amid speculation about the SEC's approval.

Despite potential short-term outflows, Kaiko analysts highlighted that the transition of GBTC saw initial outflows eventually surpassed by inflows into other Bitcoin ETFs by the end of January. They conclude that even if Ether ETF inflows "disappoint in the short term," the approval holds significant implications for ETH as an asset. It removes some of the regulatory uncertainty that has affected ETH’s performance over the past year, potentially stabilizing and enhancing its market presence in the long run.

The anticipated launch and subsequent market reactions of Grayscale’s spot Ether ETF will be closely watched by investors and analysts alike, as it could set a precedent for future crypto ETF developments and their impact on the broader cryptocurrency market.