Author: Nancy, PANews

In the early hours of May 24th, with the approval of the 19B-4 form for 8 spot Ethereum ETFs by the US SEC, the listing and trading of the ETFs is only a matter of time. Despite the successful "breakthrough" of the Ethereum spot ETF, the price of ETH has declined after a brief rise. At the same time, the potential selling pressure from Grayscale, which holds millions of ETH, has also raised market concerns.

May be listed in June, limited fund size due to lack of collateral mechanism

According to Bloomberg ETF analyst James Seyffart, the approval of the S-1 for the Ethereum spot ETF may be completed "within a few weeks," or it may take longer, typically taking up to five months. Based on the calculation that there will be a two-week comment period for S-1 amendment filings (similar to the feedback provided by the SEC to applicants for spot Bitcoin ETFs), mid-June is definitely possible.

Cobo co-founder Shenyu also stated that, referring to the Bitcoin ETF, the S-1 filing approval for the Ethereum spot ETF may take a minimum of two weeks, with the normal pace possibly taking 3 months, and it is expected to be approved in early June and start trading in mid-June.

The positive news of the Ethereum spot ETF has also fueled bullish sentiment in the market. According to Coinglass data, in the past 7 days, there has been a net outflow of nearly $130 million in ETH spot trading, with negative net inflows on exchanges for the past 4 days. Meanwhile, Adam, a macro researcher at Greeks.live, stated in a post on the X platform today that 350,000 ETH options are about to expire, with a Put Call Ratio of 0.58, a maximum pain point of $3200, and a nominal value of $1.3 billion. Encouraged by the progress of the ETF, ETH has taken over the rise in short-term option IV from BTC, reaching 150% at one point, far higher than the current IV of BTC. From the perspective of large trades and market trading structure, bullish sentiment for ETH remains strong.

However, there are currently many whales and institutions beginning to sell off in large quantities. For example, according to on-chain data analyst ai_9684xtpa, a whale/institution shorted over 38,000 ETH last night after depositing collateral on the exchange, selling for a value of $93.51 million; MEV trading company Symbolic Capital Partners sold 6,968 ETH yesterday, worth $27.38 million; Lookonchain monitoring showed that a whale address panicked and sold 7,921 ETH last night after a sharp drop in ETH price, worth $29.7 million; Spot On Chain monitoring showed that Ethereum co-founder Jeffrey deposited 10,000 ETH into Kraken, equivalent to $37.38 million.

Compared to the fund size of the Bitcoin spot ETF, it is widely believed that the space for the Ethereum spot ETF is limited. For example, Bloomberg ETF analyst Eric Balchunas predicts that the Ethereum spot ETF may receive 10% to 15% of the assets obtained by the Bitcoin spot ETF, reaching $5 billion to $8 billion.

Shenyu also stated that the main initial inflow of funds from June to December may come from retail investors, accounting for 80% to 90% of the total funds, with less participation from institutional users. Considering that ETHE is similar to GBTC, the market may face some arbitrage and selling pressure, and whether it can withstand this selling pressure remains to be seen. After December, institutional investors may gradually enter the market.

In addition, the cancellation of the collateral mechanism due to compliance requirements is also considered to be an important reason weakening the demand for the Ethereum spot ETF. However, Jeffery Ding, Chief Analyst at HashKey Group, also predicted that the Ethereum spot ETF is expected to join the collateral mechanism and is expected to achieve a market size 75% of the Bitcoin spot ETF in the medium term.

Grayscale as a barometer for ETF approval probability, market may absorb selling pressure

Grayscale is considered an important indicator for measuring the probability of ETF approval.

In the previous game of expectations for the listing of the Bitcoin spot ETF, the negative premium of Grayscale GBTC had been narrowing all the way. Similarly, with the market's growing expectation of the approval of the Ethereum spot ETF, investors have also begun to buy a large amount of discounted shares of Grayscale Ethereum Trust (ETHE) before the formal conversion of the ETF. However, unlike GBTC, this optimistic sentiment began just over a week ago.

Data from The Block shows that since May 17th, the trading volume of Grayscale Ethereum Trust (ETHE) has started to increase significantly, reaching over $687 million in trading volume on May 21st, setting a new high since May 2021. In the previous month, the trading volume of ETHE mostly ranged from $20 million to $40 million. At the same time, the discount of ETHE relative to its Net Asset Value (NAV) has also narrowed significantly from 20.52% on May 17th to the current 7.19%, after reaching a premium rate of 26% last month.

These data also to some extent demonstrate market confidence. However, once the Ethereum spot ETF is officially listed, the potential selling pressure from Grayscale, which holds a large amount of ETH, is also believed to be a risk. This investor concern is not unfounded.

In fact, since Grayscale GBTC successfully converted to a Bitcoin spot ETF, data from Farside Investors shows that GBTC has had a cumulative net outflow of $17.64 billion, making it the only ETF with such a high outflow scale and nearly 4 months of continuous outflow. Coinglass data shows that as of May 24th, the assets under management of GBTC were $19.413 billion.

According to Coinglass data, as of May 24th, Grayscale holds 2.9352 million ETH, worth over $11.17 billion. Although Grayscale's Bitcoin scale far exceeds that of Ethereum, the outflow of arbitrage profits and the lack of a collateral mechanism for the ETF are also believed to bring about capital outflows.

However, looking at the overall change in Bitcoin ETF funds, the outflow of funds from GBTC has been completely covered by other ETFs. Data from Farside Investors shows that as of May 22nd, the net inflow of Bitcoin spot ETFs still exceeded $13.43 billion. And in terms of price performance, the current price of Bitcoin has risen by about 45% since the launch of the ETF.

In other words, although the outflow of funds from GBTC has brought about some selling pressure on Bitcoin, it has been absorbed by other Bitcoin ETFs and has not had much impact on the price of Bitcoin. This also has a certain reference significance for the impact of the launch of the Grayscale Ethereum ETF on the price of ETH.

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