ETHE's 58% Surge Nearly Triples Ether’s Gains

The Grayscale trust has benefited from a narrowing of its discount.

sumit
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Senior ETF Analyst
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Reviewed by: etf.com Staff
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Edited by: James Rubin

The biggest beneficiaries of the SEC opening the door to ether-based exchange-traded funds in the U.S. have been investors in the Grayscale Ethereum Trust (ETHE). 

Since rumblings began that the regulator might approve spot ether ETFs, the discount on the quasi-closed-end fund narrowed from nearly 25% to just 5%, adding fuel to investors’ gains. 

ETHE is up 58% since May 9 versus only 22% for ether itself. 

The rapid shrinking of the discount between ETHE’s share price and the value of its underlying assets shares similarities with what happened with the Grayscale Bitcoin Trust (GBTC) late last year, when it became increasingly clear that the SEC might allow spot bitcoin exchange-traded funds to trade in the U.S. 

GBTC’s discount was as high as 44% last June but fell significantly after BlackRock filed to debut a spot bitcoin ETF. The entrance of the world’s largest asset manager into the fray gave investors confidence that after 10 years of failed attempts, spot bitcoin ETFs in the U.S. were finally a possibility. 

Over the next seven months, GBTC’ discount gradually shrunk to zero. 

As GBTC’s discount narrowed, so did the discount on ETHE as investors speculated that spot ether ETFs could follow spot bitcoin ETFs.

From last June until January, when spot bitcoin ETFs were officially approved, the ether trust’s discount fell from 56% to 8%. 

Discount Widens

But in March and April, the discount widened significantly—to more than 25%—when investors learned that the SEC might seek to block spot ether ETFs from trading. 

Questions surrounding ether’s regulatory status—whether it was a commodity or a security—might have been interfering with the ETFs’ approval. 

But just as quickly as the discount surged, it plunged.

The SEC’s tone regarding ether ETFs seemed to shift dramatically over the past week, with changing election-year, political winds prompting once crypto-shy Democrats to join Republicans in supporting, or at least not presenting an obstacle, to wider adoption. 

Regardless of the reason, investors in ETHE are cheering the news and if ether ETFs begin trading in the coming weeks as expected, then what remains of the discount will completely disappear. 

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.