Why Grayscale Could Be The Spark ETH Needs: 10x Research

A crypto research firm on Monday predicted a low chance of Grayscale suing the SEC over a potential rejection of the Ethereum ETF application on May 23.

What Happened: In fresh analysis, 10x Research highlighted the aftermath of the Ethereum ETH/USD Dencun upgrade and its impact on the market.

Since the Ethereum Dencun upgrade on March 13, 2024, ETH Gas fees have declined from 50 Gwei to just 3 Gwei while ETH prices dropped from 4,037 to 2,931 (or -27%),” lead analyst Markus Thielen noted, predicting further declines for Ethereum into the summer.

The focus, however, shifts to Grayscale, a major player in the cryptocurrency investment space, following its legal victories against the SEC.

“Not only was their Bitcoin product trading at one point -50% below its NAV but holders were locked in and could not redeem the product while being forced to pay a 2% management fee,” Thielen explained.

This scenario changed dramatically with the SEC’s decision not to appeal Grayscale's application to launch an ETF, marking a significant win for Grayscale against regulatory hurdles.

However, the victory is bittersweet as Grayscale faces substantial financial losses due to the new competitive landscape introduced by Bitcoin Spot ETFs.

“Grayscale's legal win against the SEC is overshadowed by its 1.5% annual management fee despite everybody else charging near zero,” Thielen stated.

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The approval of Bitcoin BTC/USD Spot ETFs has led to significant outflows from Grayscale’s Bitcoin Trust GBTC ETF, costing the firm an estimated $220 million annually, even as the market itself grows.

The broader implications of Grayscale's potential legal strategies are profound. As Thielen points out, “The probability is very low that the SEC will approve an ETH ETF on May 23.”

This is partly due to other ETF issuers, with considerable financial resources and broader market interests, maintaining a cautious stance to preserve their relationships with the SEC.

Despite these challenges, the potential for Grayscale to sue the SEC if an Ethereum ETF application is denied remains a topic of intense speculation within the financial community.

“Only Grayscale could sue and bring this ball rolling,” Thielen suggested, noting the firm’s unique position in the market despite the high fees it charges compared to competitors like Blackrock.

What’s Next: As the industry looks ahead, the Benzinga's Future of Digital Assets event on Nov. 19 will provide a crucial platform for discussing these developments.

Experts and industry leaders will converge to debate the future of digital assets, including the impact of SEC decisions and legal challenges on the rapidly evolving cryptocurrency ETF landscape.

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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.