Analysts at Kaiko predict that the launch of Grayscale's long-awaited Ethereum ETF could lead to a temporary drop in Ethereum price. Their reasoning is based on the initial performance of Grayscale's Bitcoin Trust when it converted to an ETF in January. Back then, a significant portion of investors (23%) sold their holdings, causing a short-term price dip.
Kaiko expects a similar trend with the Ether ETF. With a total value of $11 billion, even a small percentage of investors selling could result in daily outflows of $110 million. This represents a substantial chunk (30%) of Ethereum's daily trading volume on Coinbase. This potential sell-off pressure could create a buying opportunity for investors looking to enter the market at a lower price point. However, it is important to note that historical trends do not always predict future outcomes in the volatile cryptocurrency market.
The closing of the discount gap is the driving force behind the possible sale. In the past, Grayscale's Ethereum product (ETHE) traded significantly below its actual value (NAV). However, with the ETF conversion, this discount is expected to disappear. This incentivizes some investors who bought ETHE at a discount to sell now at a higher price.
This initial selling pressure might be temporary, just like with the Bitcoin ETF. Although the Bitcoin Trust experienced some initial withdrawals, Kaiko points out that these were eventually offset by new investments made in other Bitcoin ETFs. This suggests that the potential sale of ETHE may not have a long-lasting impact on the overall market. Additionally, the ETF conversion could attract new investors who were previously hesitant to invest in ETHE due to the discount gap.
While the initial price impact might be negative, Kaiko believes the long-term outlook for Ethereum is positive. The ETF approval by the SEC removes regulatory uncertainties that have clouded Ethereum's performance in the past year.
