Big Investors Launching ETFs Pose Risk to Grayscale’s $9 Billion Ethereum Lead
Grayscale, a prominent player in the crypto space, finds itself in a familiar position within the ETF arena. The recent debut of the first spot ether exchange-traded funds in the U.S. marks a significant development. These ETFs offer investors direct exposure to ether, the digital currency powering the Ethereum network, mirroring the ease of purchasing traditional stock and bond index funds.
Established in 2013, Grayscale has diligently cultivated a trust holding more than $9 billion in ether. This trust has now transitioned into an ETF, one of two offerings from the company. Grayscale operates under the umbrella of Digital Currency Group, led by Barry Silbert, a prominent figure in the crypto conglomerate landscape.
The Securities and Exchange Commission’s (SEC) green light for ETFs has paved the way for increased competition in the market. Investors now have the opportunity to compare offerings and seek out the most cost-effective options. Major financial institutions such as Fidelity Investments, Franklin Templeton, BlackRock, and Invesco have already entered the fray with their own spot ether ETFs.
This scenario echoes a similar occurrence in January when bitcoin ETFs received approval, prompting a shift in investor preferences towards more economical alternatives, away from Grayscale’s products.
The inaugural trading day for spot ether ETFs saw a combined trading volume exceeding $1 billion, with JPMorgan analysts estimating net sales of $104 million. Concurrently, the Grayscale Ethereum Trust (ETHE) experienced redemptions totaling $485 million. JPMorgan suggests that investors may have opted for cheaper alternatives or leveraged the ETF conversion to capitalize on enhanced liquidity compared to the previous trust structure. Trading data for the second day was not available at the time of reporting.
