Grayscale’s Ethereum Spot ETF Could See $110 Million Daily Outflows

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The anticipated launch of Grayscale’s Ethereum spot ETF has sparked significant market discussion, particularly around the potential for substantial capital outflows. Analysts project that the fund could experience average daily outflows of $110 million, based on historical patterns observed with Grayscale’s Bitcoin Trust (GBTC) following its transition to an ETF.

This forecast, highlighted in a recent report by crypto analytics firm Kaiko, underscores investor sentiment and structural dynamics likely to shape the early performance of a spot Ethereum ETF.

Historical Precedent: Lessons from GBTC

When Grayscale’s Bitcoin Trust (GBTC) converted from a closed-end fund to a spot Bitcoin ETF on January 11, it triggered a wave of redemptions. Within the first month alone, 23% of its assets under management (AUM) — totaling $6.5 billion — flowed out of the fund.

This outflow was largely driven by the elimination of GBTC’s long-standing discount to net asset value (NAV). Prior to conversion, GBTC traded at discounts as high as 17%, incentivizing investors to hold in anticipation of a conversion that would allow them to redeem shares at market value. Once the ETF launched, those investors exited positions, locking in gains.

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ETHE’s $11 Billion AUM at Risk

Grayscale’s Ethereum Trust (ETHE) currently holds approximately $11 billion in assets under management**, making it one of the largest crypto investment vehicles. If it follows a similar redemption trajectory as GBTC, Kaiko estimates that ETHE could see **average daily outflows of $110 million during the initial post-conversion period.

To put this into perspective, that figure represents roughly 30% of Ethereum’s average daily trading volume on Coinbase — a significant volume that could influence short-term price dynamics and market liquidity.

The expectation of outflows is rooted in ETHE’s recent trading behavior. Over the past three months, the trust has traded at a steep discount to its NAV — at times exceeding 26%. Such deep discounts are classic arbitrage opportunities, especially when an ETF conversion is on the horizon.

Discount Narrowing Signals Investor Anticipation

As regulatory clarity improved, ETHE’s discount began to compress. According to YCharts data, the discount was over 25% on May 1, but steadily narrowed throughout the month following increased speculation about SEC approval.

By May 24 — just after the SEC issued its preliminary approval for spot Ethereum ETFs — the discount had shrunk to just 1.28%. This rapid compression mirrors what happened with GBTC and reflects growing investor confidence that a formal launch is imminent.

Kaiko researchers note that this narrowing typically precedes redemption waves. Once ETHE transitions to a spot ETF, authorized participants will be able to redeem shares directly for underlying ETH, enabling investors who bought at a discount to exit profitably.

Short-Term Outflows vs. Long-Term Significance

While initial outflows may appear concerning, analysts emphasize that they do not reflect long-term demand. In fact, after the initial GBTC outflow surge, inflows into competing Bitcoin ETFs soon surpassed redemptions from Grayscale’s fund.

Similarly, even if ETHE experiences net outflows in the early stages, the approval of a spot Ethereum ETF remains a landmark moment for the crypto ecosystem. It marks a critical step in legitimizing Ethereum as an investable asset class and reduces the regulatory uncertainty that has weighed on its performance over the past year.

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Opening the Floodgates for Crypto ETFs

According to TD Cowen’s Washington Research Group, the approval of Ethereum ETFs paves the way for broader adoption of crypto-based financial products. While the timing surprised some market observers, the team views it as a natural progression following the earlier greenlighting of Bitcoin spot ETFs.

Jaret Seiberg, a policy analyst at TD Cowen, noted that Ethereum ETF approval came about six months earlier than expected, but was foreseeable after the SEC allowed Bitcoin futures ETFs and eventually spot versions.

“This sets a precedent,” Seiberg said. “If Ethereum — a programmable blockchain with complex use cases — can be treated as a commodity, it strengthens the case for other tokens being classified similarly.”

Ethereum’s Non-Security Status Gains Traction

One of the most consequential implications of spot ETH ETF approval is the de facto recognition of Ethereum as a non-security.

Bloomberg ETF analyst James Seyffart stated that the SEC’s approval of commodity-based Ethereum trusts signals an official acknowledgment that Ethereum is not a security under U.S. law.

This distinction is crucial. Unlike securities, which are subject to strict registration and disclosure requirements, commodities fall under lighter regulatory frameworks governed by agencies like the CFTC.

Seyffart added that this classification could extend to other major cryptocurrencies, potentially reshaping how digital assets are regulated across markets.

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Frequently Asked Questions (FAQ)

Q: Why is Grayscale’s Ethereum ETF expected to see daily outflows?
A: Because ETHE has historically traded at a steep discount to its net asset value. Once it becomes a spot ETF, investors can redeem shares for actual ETH, leading many to exit their positions profitably — just as happened with GBTC.

Q: How much money could flow out of ETHE daily?
A: Analysts estimate average daily outflows of around $110 million, based on AUM size and redemption patterns seen in GBTC after its ETF conversion.

Q: Does this mean Ethereum is losing investor interest?
No. Short-term outflows are primarily technical and structural, driven by arbitrage opportunities. Long-term, ETF approval strengthens Ethereum’s legitimacy and may attract new institutional capital.

Q: What does ETF approval say about Ethereum’s legal status?
The SEC’s approval implies that Ethereum is being treated as a commodity, not a security. This reduces regulatory risk and supports future financial product development.

Q: Will other crypto ETFs follow?
Yes. The approval of Bitcoin and Ethereum spot ETFs sets a strong precedent. Assets like Solana or Cardano could be considered in the future if they meet regulatory criteria for commodity classification.

Q: When will Grayscale’s Ethereum ETF start trading?
While preliminary approval has been granted, the final launch date depends on SEC confirmation and regulatory filings. Market expectations point to mid-2025 pending final rule clearance.

Core Keywords:

With structural shifts underway and regulatory momentum building, the arrival of a spot Ethereum ETF represents both a challenge and an opportunity — one that could redefine how digital assets are accessed and valued in traditional finance.