Grayscale Ethereum Trust Trades at Record 60% Low Against Ethereum

Grayscale is currently battling the SEC regarding the future legal status of its funds, as its GBTC and ETHE products trade at a discount.

By Will McCurdy

Grayscale manages billions of dollars worth of cryptocurrencies. Image: Shutterstock.

The Grayscale Ethereum Trust (ETHE) now trades at a record 59.39% discount relative to the price of Ethereum (ETH), per data from YCharts.

Though at one point the fund actually traded at a significant premium relative to ETH, it has continuously been at a discount compared to market prices since November 2021.

ETHE allows traditional investors to gain exposure to Ethereum without investing in the cryptocurrency themselves and is managed by Grayscale Capital, one of the crypto world’s largest institutional investors.

The fund, which has roughly $3.6 billion in assets under management (AUM), has lost roughly 68.37% of its value this year to date, as ETH and other crypto assets have declined more broadly.

GBTC trades near record discount

Grayscale’s sister fund, the Grayscale Bitcoin Trust (GBTC), is facing similar issues.

Per YCharts, shares in GBTC are currently trading at a 45.17% discount relative to the price of Bitcoin, slightly up from its record discount of 48.89% recorded in mid-December. Although investors in funds can sell their shares at any point, they don’t have access to the underlying cryptocurrency they are investing in.

Grayscale has been battling the SEC since June for the right to convert its cryptocurrency funds into Exchange-traded funds (ETFs), enabling them to be traded on public stock markets—which could improve their liquidity significantly.

The news comes amid speculation over the financial health of Grayscale and its parent company Digital Currency Group (DCG).

In December, Dutch cryptocurrency exchange Bitvavo claimed in a blog post that DCG is “experiencing liquidity problems due to the current turbulence in the crypto market” and that DCG “has suspended repayments until this liquidity issue has been resolved.”

DCG claims that these liquidity issues are confined to Genesis.

This hefty discount is an issue that Grayscale’s upper management has been trying to address; Grayscale CEO Michael Sonnenshein wrote in a year-end letter to investors that it will “explore other options to return a portion of GBTC’s capital to shareholders” if it fails in its struggle to offer such funds as ETFs.