The price of Ether will likely be “sensitive” to spot Ether ETF inflows in the coming days, as investors will remember lackluster demand for ETH futures products late last year, says crypto analytics firm Kaiko.
“The launch of the futures-based ETH ETFs in the US late last year was met with underwhelming demand, all eyes are on the spot ETFs’ launch with high hopes on quick asset accumulation,” said Kaiko’s head of indices Will Cai in a July 22 market report.
“Although a full demand picture may not emerge for several months, ETH price could be sensitive to inflow numbers of the first days.”
Several spot Ether (ETH) ETFs received their final approval on July 22 and are now set to go live trading on July 23.
Cai said one of the most obvious impacts of price is expected to come from “potential” outflows from Grayscale’s Ethereum Trust (ETHE).
Much like Grayscale Bitcoin Trust (GBTC) was for Bitcoin, ETHE is a fund that offers institutional investors exposure to ETH. However, it enforces a six-month lock-up period on its shares.
The conversion of ETHE into a spot ETF will allow traders to buy and sell more easily, meaning that many investors who purchased ETHE shares will likely look to cash out following its switch to a spot product on July 23.
“ETHE’s discount to net asset value closed over the past few weeks, after widening between February and May as hopes of approval waned,” added Cai, noting:
“The narrowing discount suggests traders bought ETHE below par and will redeem these shares at NAV price on conversion to realize profits.”
Some expect ETH ETFs to underwhelm
While spot Bitcoin ETFs were a major catalyst for the digital asset in the months following their launch, there’s less confidence that Ether ETFs will be as popular.
Crypto market maker Wintermute wrote in a July 21 research report that it expects Ethereum ETFs to generate between $3.2 billion and $4 billion of inflows in their first year of trading.
“Our view is the ETFs will likely see lower-than-anticipated demand, closer to $3.2 to $4 billion," wrote Wintermute.
Meanwhile, the firm predicts that Bitcoin ETFs will generate roughly $32 billion in assets before the end of this year. This puts Wintermute’s estimates of total first-year inflows into the ETH ETF at around 10 to 12% of Bitcoin ETF flows.
From this, the market-making firm expects the price of ETH to rise no more than 24% by the end of the year.
Meanwhile, boutique crypto asset firm ASXN provided a more bullish outlook in a July 22 post to X, predicting an average monthly inflow of between $800 million and $1.2 billion into ETH ETFs.
ASXN added that it expects the price impact of ETHE outflows to be less dramatic than the market fears due to a tightening and dynamic discount premium to net asset value (NAV) and the launch of Grayscale’s mini ETH ETF, which they predict will subdue outflow pressure.
“We are open to an upside surprise given the unique dynamics of ETHE trading at par prior to the launch and the introduction of the mini trust,” wrote AXN.