The Grayscale Ethereum Trust (ETHE) is currently trading at a steep discount to its assets under management (AUM) amid dwindling institutional interest in the fund.
As of now, the fund’s discount to net asset value (NAV) has fallen to one record 60%, the lowest premium rate since the inception of ETHE. After a gradual correction in September amid excitement over the merge upgrade, the premium rate for ETHE started to drop significantly by the end of October.
The collapse of FTX, once the third largest cryptocurrency exchange in the world, has apparently been the final nail in the coffin for ETHE. The event triggered a wave of surrenders that sent the fund’s premium rate on a steady decline, eventually leading to the current 60% discount rate.
More specifically, the fund saw its discount increase by more than 33% in the last month of 2022 alone. Data from YCharts shows that ETHE discounting was around 45% on December 1, but increased to 59.30% by the end of that month.
The low performance of Grayscale’s Ethereum Trust relative to its sole asset reflects investors’ uncertainty about the ability to redeem ETHE for Ether anytime soon.
Grayscale does not offer a redemption program for any of its funds. Therefore, investors cannot give ETH to Grayscale to redeem Ether and because of this restriction, Grayscale Trust trades for its assets at a different price.
Notably, Grayscale’s flagship offering, its Bitcoin Trust (GBTC), has also been trading at record discounts over the past few months. As of now, the GBTC discount is around 45%, which is slightly above the all-time high of around 48%.
GBTC and ETHE are digital currency investment products that offer exposure to Bitcoin and Ethereum. These funds act as pseudo-ETFs, allowing individual investors to buy and sell them within their own brokerage accounts while enjoying benefits such as safety, flexibility and low fees.
GBTC has become the largest BTC fund. So far, the fund manages 635,240 BTC, worth about $12 billion, or more than 3.3% of the circulating supply of BTC. Meanwhile, there are over 3,000,00 Ether in ETHE.
It is worth noting that Grayscale has been trying to convert its GBTC fund into a spot bitcoin ETF for some time now. However, the SEC is denying the company’s application to convert GBTC to an ETF. also in grayscale sued the SEC On rejection of your ETF application, however, it can take years for the court to render a decision.
As mentioned, grayscale refused to share its proof-of-reserve in November last year, citing “security concerns”. The move fueled speculation about the financial health of the company.
Bitcoin Crypto Related Post