The Grayscale Ethereum Trust (ETHE) has recorded significant gains since Cathie Wood’s asset management firm ARK Invest and investment manager VanEck filed applications with the United States Securities and Exchange Commission (SEC) to launch a spot Ethereum exchange-traded fund (ETF).
According to a tweet by blockchain intelligence firm IntoTheBlock, the ETHE discount to net asset value (NAV) narrowed to 26% despite a drop in ETH price within the same period.
Following Ark’s spot ETH ETF filing, Grayscale’s ETH fund is close to its yearly highs, even while Ether itself is down over 20%.
Here’s what’s going on
ETHE has increased by over 140% in 2023, significantly narrowing its discount to the underlying Ether it holds
— IntoTheBlock (@intotheblock) September 8, 2023
Grayscale’s ETHE Discount Narrows
On September 6, ARK Invest moved towards launching the first spot Ether ETF in the United States. In an S-1 filed with the SEC, the asset management firm said the ARK21Shares Ethereum ETF would track the performance of ETH.
Leading American crypto exchange Coinbase would be the custodian of the product to hold all of the fund’s ETH, while crypto exchange-traded products issuer 21Shares is the trust’s sponsor. ARK Invest will serve as the sub-adviser of the ETF and handle the marketing of its shares.
Along with VanEck’s filing, the news caused an uproar in the crypto market, with bitcoin (BTC) and ETH recording a brief ascent before falling back to their pre-announcement levels. While the crypto assets experienced a short glee, ETHE continued to progress.
IntoTheBlock said ETHE had narrowed the discount to its underlying ETH by a fair margin, recording a more than 140% increase in 2023. The discount started decreasing in June when the world’s largest asset manager, BlackRock, led several traditional finance giants to file for a spot Bitcoin ETF. The discount first moved from -56% to -36% that month and then dropped to -26% this month, reaching a level seen since October 2022.
The blockchain intelligence firm said the trend suggests that the crypto market is weighing the odds that Grayscale may convert ETHE into an ETF due to the push from other companies in the industry.
Launching the First U.S. Spot Ether ETF
The race to launch the first spot Ether ETF comes as the crypto community awaits the SEC’s approval of the set of applications seeking to launch a spot Bitcoin ETF.
While the regulator’s next move remains unclear, Grayscale’s recent victory in the legal battle with the agency over its continued rejection of a spot Bitcoin ETF could influence the regulator’s decision.
Analysts have set May 23, 2024, as the estimated deadline for the SEC to approve the filings for a spot Ether ETF.
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