The Grayscale Ethereum Trust (ETHE) recently traded at a very high discount (59.39%) compared to the price of Ethereum, news that puts the crypto world on alert. Since November 2021, the trust’s market price has been at a continuous discount now, the situation is one to watch carefully.
The trust has about $3.6 billion in assets under management (AUM) and has lost about 68% of its value in 2022 alone, partly due to the broad decline in the value of Ethereum. The main problem lies in the fact that owners of ETHE shares cannot return them in exchange for the Ethereum token (ETH), which leads to a decline in the real market value of the shares.
Grayscale news: the role of the Ethereum (ETHE) product in the crypto world?
Among the founders of Grayscale Ethereum Trust are prominent figures in the crypto ecosystem including Barry Silbert, Joey Krug, and Michael Novogratz.
The Grayscale Ethereum Trust token is a cryptocurrency using the Ethereum blockchain, designed to provide investors with a way to gain exposure to the Ethereum blockchain while also providing them with an opportunity to earn through the trust’s underlying assets.
We are talking about something quite valuable to the cryptocurrency landscape because it is a trust that invests in Ethereum-based assets. We all know the value of ETH, which is for investors an asset that enables smart digital contracts and decentralized applications.
The trust has invested in many Ethereum assets, including Ether and ERC20 tokens. ETHE investors are eligible for monthly distributions of 0.25% of the trust’s net asset value (NAV), plus any accrued interest, subject to certain limitations.
The trust also has a diversified portfolio of assets and offers investors the opportunity to gain exposure to Ethereum while also mitigating the risk associated with investing in digital assets.
ETHE’s twin fund, Grayscale Bitcoin Trust (GBTC), is also in trouble
The twin fund of ETHE is facing similar problems with price discounts. In fact, shares of Grayscale Bitcoin Trust (GBTC) have also plunged 45%. Despite a slight increase from December, the situation is very problematic.
Clearly, their lawsuit against the SEC to convert cryptocurrency funds into exchange-traded funds (ETFs), is not helping to address the bear market, although by winning the lawsuit the situation for the trust would become easier.
The Securities Exchange Commission (SEC) has indeed rejected Grayscale Investments’ application to convert Grayscale Bitcoin Trust (GBTC) into an ETF, which caused Grayscale to want to sue.
According to the SEC, however, this conversion is not possible because Grayscale has not done enough to protect investors from fraudulent and manipulative acts and practices.
Michael Sonnenshein, Grayscale’s CEO, stated:
“Grayscale supports and believes in the SEC’s mandate to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation – and we are deeply disappointed and strongly disagree with the SEC’s decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market.
Through the ETF application review process, we believe that U.S. investors have overwhelmingly expressed a desire to see GBTC convert to a spot Bitcoin ETF, which would unlock billions of dollars of investor capital by bringing the world’s largest Bitcoin fund further into the U.S. regulatory perimeter. We will continue to leverage all of the firm’s resources to support our investors and the fair regulatory treatment of Bitcoin investment vehicles.”
