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Ethereum staking could present challenges for crypto asset manager Grayscale if the SEC greenlights fund conversion for ETHE as it did for GBTC.
These are the findings of BitMEX research, which added that if the SEC does not allow staking, then there will be large outflows from the firm’s ETHE fund, larger than those from its Bitcoin ETF.
“All the more reason to redeem from ETHE as soon as you can,” it advised.
Staking Allowed in ETFs?
Moreover, if Grayscale lowers the fee from 2.5% to 1.5% and the staking yield is 4%, investors could lose 5.5% by not redeeming and holding stETH, it stated.
If the SEC does allow ETH staking, ETF issuers such as BlackRock and Fidelity could adopt a policy where 70% of inflows are staked, and 30% is held in spot ETH for liquidity.
“For ETHE it’s not so easy, they are expecting large and unknown outflows. This will mean the ETHE yield could be lower, encouraging more 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 at conversion
If the SEC does not allow staking, then all the more reason to redeem from ETHE as soon as you can, if Grayscale lower 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 of $10.2 billion, which equates to roughly 3 million ETH.
A large exodus from this fund is likely to impact spot market prices for the underlying asset unless it gets scooped up by rival Ethereum ETFs. This is all if they аре greenlit by the SEC in May when the final deadline is.
BitMEX Research concluded:
“Given what happened to GBTC, if Grayscale doesn’t manage to do staking, outflows could be even more intense. If they do stake, dealing with large outflows at the start could be even more challenging.”
Fidelity Applies for ETH Staking
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 for spot ETH fund ETF applications, which are in the SEC approval queue.
These include BlackRock, Ark 21Shares, Franklin Templeton, Grayscale, and Van Eck, which has its final decision deadline on May 23.
FIDELITY ADDS STAKING TO THEIR ETH ETF APPLICATION IN AMENDMENT
Source: DB | Coins: ETH
— db (@tier10k) March 18, 2024
However, analysts are not too confident about approvals as the regulator is not engaging with issuers as it did with Bitcoin products and has already cracked down on staking in the United States.
This could spell a rocky road for Ethereum ahead. The asset has dumped more than 6% on the day, falling back to $3,387 at the time of writing. Unlike Bitcoin, it did not reach a new all-time high and remains down 30% from its November 2021 peak.
This article first appeared at CryptoPotato
