Ethereum
Grayscale’s Ethereum Trust discount shrinks to 3-year low as ETF approval looms
Grayscale’s Ethereum Trust (ETHE) discount fell to less than 10%, its lowest level since 2021, amid growing expectations for the approval of a spot Ethereum exchange-traded fund (ETF).
From May 21, market data from YCharts shows that the ETHE discount rate has reduced to 6.66%. “Discount” indicates when ETHE shares are trading below their net asset value (NAV).
ETHE Discount or Premium. (Source: YCharts)
ETHE began trading at a discount in early 2021 after Grayscale halted buybacks, reaching almost 60% by the end of 2022.
However, it started to shrink in 2023 as Grayscale gained legal victories against the United States Securities and Exchange Commission (SEC) in its attempt to convert its Bitcoin trust into an ETF. Since then, the reduction has oscillated between 10% and 20% before falling sharply to 6% following recent developments around the Ethereum ETF.
What motivates the reduction?
This week, reports revealed that the US SEC could approve Ethereum spot ETFs, a significant change from previous expectations.
In response, several ETF applicants quickly amended their documents filed with the financial regulator. On May 21, Grayscale and other issuers like Fidelity withdrew the staking proposal from their Ethereum ETF spot plans.
As a result, market analysts suggested that the reduction in the ETHE discount was a sign that traders were flocking to the product to take advantage of the arbitrage opportunities the discount presented and selling for spot if ETHE went down. converted into ETF.
Therefore, experts have warned that a Grayscale Ethereum ETF could see significant outflows at launch, mirroring the situation with GBTC. Nic Puckrin, CEO of Coin Bureau, wrote:
“Let’s not forget what happened with the GBTC approval after the BTC ETF approval. Grayscale’s ETH product holds 2.9 million ETH (around $10 billion). This represents approximately 76% of the total float of ETH investment products worldwide. This was more than GBTC held before the BTC ETF was approved.