Grayscale’s Ethereum Trust Plagued With Persistent Discounts

Grayscale’s Ethereum Trust Plagued With Persistent Discounts

With May nearing its end, the market watchers are looking forward to the decision of the Securities and Exchange Commission (SEC).

The US securities regulator has to respond to the applications it has received for a spot Ethereum exchange-traded fund (ETF).

Grayscale has already withdrawn its application for converting its Ethereum Trust into an ETF, the same way it did with its Bitcoin Trust.

Despite that, the Ethereum Fund’s discount to net asset value (NAV) has now reached 23.78%.


Grayscale’s Bitcoin Trust (GBTC) made the transition to a publicly traded ETF from an over-the-counter (OTC) traded entity in January.

There was a reduction in the discount on NAV and it stabilized after declining to 40% two years earlier. Grayscale’s Ethereum Trust is similar to GBTC and trades OTC style under the ticker ETHE.

Shares of the trust are backed by Ether, with every share representing 0.00946495 ETH. Grayscale has not disclosed the total ether it holds in its reserves, unlike GBTC.

Data from Arkham Intelligence shows that the organization has about 2.97 million ETH tokens. They have a value of $8.6 billion.

These are the combined holdings from Grayscale’s Ethereum Trust (ETHE) and Digital Large Cap fund (GDLC).

The discount

Data shows that ETHE is currently trading at a discount of 23.78%. There had already been a tightening in the discount to the NAV before the approval of Bitcoin ETFs.

In December 2023, the said discount stood at about 7.86%. It was around 10% in the first half of March this year.

However, it has declined since then, and by mid-April, it reached a low of 25%. A discount arises because there is no redemption mechanism applicable in the case of ETHE.

It is a closed-end fund, which means there is no arbitrage between its NAV and share price. The discount rate is also rising due to the slim chances of approval of an Ethereum ETF.

Ethereum ETF

Nevertheless, it should be noted that the chances of the US SEC giving the green light to a spot Ethereum ETF are very low.

Polymarket has disclosed betting data, which suggests that the probability of an Ethereum ETF stands at just 7%.

In addition, Grayscale has also withdrawn its application of converting the ETHE into an Ethereum ETF. This could be because it anticipates a rejection from the US securities regulator.

However, there is also speculation that Grayscale may have chosen to withdraw the application to make amendments to it.

Other asset managers who have submitted Ethereum ETF applications have also made amendments. Speculators are closely monitoring the situation.

The fact that the probability is low means that a spot Ethereum ETF is going to face a difficult road ahead. This has left investors uncertain about the future.

Meanwhile, spot Bitcoin ETFs have once more resumed inflows this week. They have had a positive start, as the net inflows were notable.

GBTC has held the title of the largest Bitcoin ETF due to its Bitcoin reserves, but it is very close to losing it. This is because BlackRock’s IBIT ETF is trailing it.