The recent revelation of a regulatory filing for the introduction of a spot ether exchange-traded fund (ETF) by the Cboe BZX has witnessed the Grayscale Ethereum Trust’s (ETHE) discount to net asset value (NAV) slim down to a mere 27% as of Thursday’s stock market closing, according to CryptoQuant data. It stands to be noted that this is the first time we’re observing such a reduction since the previous year, a positive reflection considering the discount had alarmingly rocketed to nearly 60% in the face of plummeting crypto markets the past year.
June marked the beginning of a tightening squeeze in the ETHE discount following a spot Bitcoin ETF filing by BlackRock. The scenario progressed with Grayscale’s successful tussle against the U.S. Securities and Exchange Commission (SEC) in a bid to morph its Bitcoin Trust (GBTC) into an ETF. Riding on these back-to-back upheavals in the crypto domain, now, the initiation of the first U.S. spot ether ETFs, in collaboration with asset manager giants VanEck and Ark Invest, by Cboe BZX, could alter Ethereum’s future.
Many speculate that the increasing ventures by traditional finance magnates into the crypto sphere could kindle Grayscale’s hopes of altering its ETHE product into an ETF. Such an assumption cascades from Lucas Outumuro’s statement, the head of research at crypto analytics firm IntoTheBlock, who flagged the market’s active role in speculating higher odds for Grayscale’s ETF conversion.
This entire sequence of events has very positively affected the ETHE shares, which boast a surge of 140% this year. Quite remarkably, this surge eclipses the underlying crypto’s year-to-date profit margin, standing at a mere 36%.
The Grayscale Ethereum Trust, currently holding the management of $4.5 billion in ether, functions as a closed-end fund. As of now, the structure stands non-redeemable, propelling the theory that transitioning the trust into a redeemable ETF structure could effectively obliterate the discount to zero. However, critics may argue that what the market presumes as a tailwind might actually prove to be a headwind. Nothing in the crypto world is as straightforward as it seems, and a redeemable ETHE ETF may bring with it a mutating market response, readings of which are yet unpredictable. The road from ETHE to ETF may be paved with fluctuating investor sentiment based on the caprices of token redemption, pros and cons of which will only uncoil with time.
Source: Coindesk
