ETH PRICES MAY STRUGGLE UNDER THESE CONDITIONS 

The upcoming months could prove challenging for Ethereum if Bitcoin’s downturn persists and the SEC disapproves of direct Ethereum ETF applications.

Grayscale’s Ethereum staking could hit a snag if the SEC approves its fund transformation for ETHE similar to what was done with GBTC.

According to BitMEX research, the absence of SEC approval for staking might lead to substantial withdrawals from Grayscale’s ETHE fund, surpassing those from its Bitcoin ETF.

BitMEX suggested, “It’s increasingly sensible to opt-out of ETHE at the earliest opportunity.”

The Prospects of Staking in ETFs

Should Grayscale reduce its fee from 2.5% to 1.5%, with staking yields at 4%, investors might see a 5.5% disadvantage by not opting out and retaining stETH, according to the report.

Should the SEC approve ETH staking, ETF providers like BlackRock and Fidelity might implement a strategy where 70% of new investments are staked and 30% are kept as liquid ETH.

For ETHE, facing anticipated significant and unpredictable withdrawals, the resulting yields may be less appealing, potentially leading to further withdrawals.

Since its transformation, Grayscale has witnessed a 40% reduction in GBTC’s assets under management in just under ten weeks.

Grayscale’s Ethereum Trust currently manages $10.2 billion in assets, translating to about 3 million ETH.

A substantial departure from this fund could significantly influence the market price of the underlying asset, especially if not absorbed by competitive Ethereum ETFs, contingent on SEC approval by May.

BitMEX Research summarized:

Should Grayscale fail to implement staking, the aftermath could be markedly harsh. Conversely, initiating staking may present its own set of challenges, particularly with initial large-scale withdrawals.

Fidelity Seeks ETH Staking Approval

Fidelity, on March 18, petitioned the SEC for authorization to stake a portion of ETH for its proposed spot ETF.

Eight ETF issuers, including notable names like BlackRock, Ark 21Shares, Franklin Templeton, Grayscale, and Van Eck (with a decisive deadline on May 23), are awaiting SEC’s verdict on their spot ETH ETF applications.

Nevertheless, the outlook for approval remains bleak as the regulator’s interaction with issuers is less than with Bitcoin counterparts, coupled with existing staking restrictions in the U.S.

This presents a precarious situation for Ethereum, which has already declined over 6% on the day, dropping to $3,387. Unlike Bitcoin, Ethereum has not achieved a new all-time high and is still 30% below its peak from November 2021.

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