Staking in ethereum could present challenges for crypto asset manager Grayscale if the SEC gives the green light to converting funds for ETHE like it did for GBTC.
These are the findings of BitMEX's research, which added that if the SEC does not allow staking, there will be large outflows from the company's ETHE fund, larger than those from its bitcoin ETF.
“All the more reason to redeem into ETHE as soon as possible,” he advises.
Is betting on ETFs allowed?
Additionally, if Grayscale reduces the fee from 2.5% to 1.5% and the staking yield is 4%, investors could lose 5.5% by not redeeming or holding stETH, he stated.
If the SEC allows eth staking, ETF issuers like BlackRock and Fidelity could adopt a policy where 70% of inflows are staked and 30% held in spot eth for liquidity.
“For ETHE it is not so easy, they expect big and unknown exits. This will mean that the yield on ETHE could be lower, which will encourage more capital outflows.”
Grayscale has already seen a 40% decline in GBTC AUM since its conversion less than ten weeks ago.
eth ETF: eth staking could present challenges for Grayscale's ETHE product in conversion
If the SEC does not allow staking, then all the more reason to redeem from ETHE as soon as possible, if Grayscale reduces the fee from 2.5% to 1.5% and the staking yield is 4%, investors. ..
— BitMEX Research (@BitMEXResearch) March 19, 2024
Grayscale's ethereum Trust currently has assets under management worth $10.2 billion, which is roughly equivalent to 3 million eth.
A large exodus from this fund is likely to impact spot market prices of the underlying asset unless it is absorbed by rival ethereum ETFs. All of this will be possible if the SEC gives them the green light in May, when the final deadline expires.
BitMEX investigation concluded:
“Given what happened with GBTC, if Grayscale fails to gamble, the exits could be even more intense. If they gamble, dealing with large capital outflows at the beginning could be even more challenging.”
Loyalty applies for eth participation
On March 18, investment giant Fidelity filed an amendment with the SEC seeking permission to stake a portion of the eth held by its proposed spot ETF.
There are eight ETF issuers that have filed eth spot fund ETF applications, which are in the SEC approval queue.
These include BlackRock, Ark 21Shares, Franklin Templeton, Grayscale and Van Eck, whose final decision is due May 23.
FIDELITY ADDS Staking TO ITS eth ETF APPLICATION IN AMENDMENT
Source: DB | Coins: eth
— database (@tier10k) March 18, 2024
However, analysts are not too confident in the approvals, as the regulator is not engaging with issuers as it did with bitcoin products and has already cracked down on gambling in the United States.
This could mean a difficult road ahead for ethereum. The asset has plunged more than 6% on the day, falling to $3,387 at the time of writing. Unlike bitcoin, it did not reach a new all-time high and remains 30% below its November 2021 peak.
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