The discount to net asset value (NAV) for the Grayscale Ethereum Trust (ETHE) has narrowed to its slimmest in a year following this week’s regulatory filing for what would be the first spot ether exchange-traded fund (ETF).
As of the close of stock market trading Thursday afternoon, the discount had declined to 27% for the first time since last September, CryptoQuant data shows. The discount had ballooned to near 60% late last year alongside plunging crypto markets.
The narrowing of the ETHE discount began in earnest in mid-June after BlackRock filed for a spot bitcoin ETF, and continued further last week after Grayscale’s court victory over the U.S. Securities and Exchange Commission (SEC) in its bid to convert its Bitcoin Trust (GBTC) into an ETF. The momentum continued this week after Cboe BZX filed to launch what would be the U.S.'s first spot ether ETFs with asset managers VanEck and Ark Invest.
“The market is weighing higher odds that Grayscale will be able to convert its ETHE product into an ETF following the push from traditional finance giants into the space,” Lucas Outumuro, head of research at crypto analytics firm IntoTheBlock, noted in a report.
The action has sent ETHE shares higher by 140% this year, IntoTheBlock noted, significantly outperforming the underlying cryptocurrency’s 36% year-to-date gain.
Grayscale and CoinDesk are both owned by Digital Currency Group.
ETHE is a closed-end fund that manages $4.5 billion worth of ether. Its current structure doesn’t allow redemptions, so converting the trust into an ETF – a structure that does allow for share redemptions – would effectively close the discount to zero.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.