quick take
Grayscale’s Bitcoin Trust experienced huge outflows after converting to a Spot Bitcoin ETF, but a potential Ethereum ETF conversion could play out differently. There is speculation that the long-awaited Ethereum ETF has a 75% chance of being approved by May 23, according to Bloomberg analysts.
However, while Grayscale announced details of the Grayscale Ethereum Mini Trust ahead of the ETH ETF's possible approval, the equivalent Bitcoin Mini Trust was not launched until after the ETH ETF's approval.
Recently, Grayscale filed a registration statement on Form S-1 for a new Spot Ethereum ETF called the Grayscale Ethereum Mini Trust. The proposed ticker symbol for this ETF is “ETH.” Additionally, we have also filed a Schedule 14C Information Statement for the existing Grayscale Ethereum Trust (ETHE), detailing how ETHE will fund the new mini-trust through the spin-off of a certain amount of Ethereum.
According to Grayscale's website,
“14C describes how ETHE will seed the Grayscale Ethereum Mini Trust by spinning off a certain amount of ETHE’s Ether to ETH, which is also subject to regulatory approval. ETH shares will then be distributed proportionately to ETHE shareholders.
Grayscale believes that the approval of the Grayscale Ethereum Mini Trust will be a net positive for existing ETHE shareholders as they will be able to maintain the same exposure to Ethereum with the added benefit of lower average fees for both products. I am.
The next key deadline is May 23, when the SEC must approve the listing exchange's Form 19b-4. Additionally, ETHE's Form S-3 and ETH's Form S-1 must each be declared effective prior to listing on NYSE Arca. Grayscale has reassured current ETHE holders that nothing needs to be done on their part before the spin-off.
Launching the Grayscale Ethereum Mini Trust in parallel with ETHE could reduce outflows by lowering fees and requiring no action from investors. This is in contrast to the launch of a Bitcoin ETF where GBTC experienced $17.6 billion in outflows as no similar mini-trust existed. GBTC's expense ratio is currently 1.5%, which is significantly higher than other issuers' roughly 0.20%. This increase in the expense ratio is the main reason for the large outflow.
However, amendments to the filing, including the removal of Ethereum staking under control, could lend credence to the argument that the outflow could still be substantial.
