Following a period of trading below its net asset value (NAV), the Grayscale Ethereum Trust (ETHE) has reversed course and is now trading at a premium. This shift underscores rising investor enthusiasm ahead of the anticipated launch of spot Ethereum exchange-traded funds (ETFs) in the United States.
On July 3, ahead of the Independence Day holiday, ETHE, which had traded at a discount for the past three years, reached a premium to NAV of 0.31%, as reported by YCharts. This premium or discount to NAV indicates whether each share’s market price is higher or lower compared to the value of the Ethereum it represents.
The narrowing of ETHE’s discount began after the crypto bear market low in December 2022, intensifying speculation surrounding the U.S. Securities and Exchange Commission’s (SEC) potential approval of spot Ethereum ETFs, following the launch of similar products for Bitcoin in January.
Despite periods of widening between March and May, the discount sharply narrowed after the SEC’s approval of eight 19b-4 forms for spot Ethereum ETFs from major institutions like BlackRock, Fidelity, and Grayscale on May 23. However, trading can only commence once their S-1 registration statements become effective, expected within the next few weeks.
Historically, the Ethereum Trust traded at a discount due to shares not being redeemable, leaving selling as the sole option for shareholders. Previously, it traded at a premium until a crypto credit crunch in 2021.
The closure of the discount suggests imminent launches of spot Ethereum ETFs, as investors are purchasing discounted shares in anticipation of potential ETF conversions, akin to Grayscale Bitcoin Trust (GBTC) before its ETF conversion in January.
As of now, ETHE holds $9.5 billion in assets under management, as reported by Grayscale.
