LUCKNOW (CoinChapter.com) — Grayscale’s Ethereum ETF has experienced massive outflows just one week after its launch, far exceeding the pace of outflows seen in its Bitcoin counterpart earlier this year.
The newly converted Grayscale Ethereum Trust (ETHE) saw its ETH holdings plummet by 17.44% in just five trading days. To put this in perspective, it took 11 days for Grayscale’s Bitcoin Trust (GBTC) to see a similar percentage decline after its conversion to an ETF in January.
GBTC has seen its Bitcoin holdings decrease by 56.3% since its conversion to an ETF. This suggests that significant outflows from ETHE may continue in the coming weeks and months. However, some analysts believe that the aggressive early outflows may subside faster for ETHE than they did for GBTC.
Analysts Point to Arbitrage Opportunities and High Fees as Key Factors
This rapid asset bleed comes despite Grayscale’s efforts to retain investors. The company launched a spinoff fund with the ticker ETH, offering the lowest management fee in the market at 0.15%. This was in stark contrast to ETHE’s 2.5% fee, which is significantly higher than the 0.19%-0.25% charged by competitors.
Analysts suggest several factors contributing to this accelerated outflow. Traders may be selling ETHE shares early to capitalize on arbitrage opportunities. Some investors, particularly those from bankruptcy estates, might be liquidating assets more quickly than observed with GBTC. Additionally, ETHE’s high 2.5% management fee might be driving investors to cheaper alternatives.
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New Ethereum ETFs See $508 Million Inflows
The impact of these outflows has been felt in the market, with the ETHBTC ratio hitting lows of 0.047.
However, it’s not all doom and gloom for Ethereum ETFs. Other new entrants in the market have seen strong inflows. BlackRock’s ETH ETF attracted 151,831 ETH (approximately $508 million) in its first five trading days, while Bitwise and Fidelity saw inflows of 81,413 ETH and 74,243 ETH, respectively.
In total, the new ETH ETFs (excluding Grayscale) saw inflows of $1.3 billion in their first week. This is 37.7% of the launch week inflows that Bitcoin ETFs received in January, indicating solid demand for Ethereum ETFs despite Grayscale’s challenges.
Looking ahead, despite the rocky start, market experts project net inflows for Ethereum ETFs to reach $4 billion by the end of the year, mirroring the trajectory seen with Bitcoin ETFs. After one week, ETH’s net flows are minus-$440 million, a figure expected to turn positive as the market stabilizes.
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