Grayscale Ethereum Trust (ETHE) Discount Drops to 60% Against Ethereum

The shares of the Grayscale Ethereum Trust (ETHE) are currently trading at a steep discount of 60% to the spot ETH price.

Although at one point the fund was trading at a significant premium relative to the ETH price, it has been continuously traded at a steep discount in comparison to the market prices since November 2021.

The Grayscale Ethereum Trust (ETHE) gives institutional investors exposure to ETH through a regulated environment and without investing in the asset themselves. Digital Currency Group (DCG), the world’s largest digital asset manager manages this investment instrument.

The ETHE fund currently has $3.6 billion in assets under management (AUM) and has lost around 69% of its value over the last year with the sharp fall in the price of ETH and other crypto assets.

Grayscale has been in a long-torn battle with the U.S. Securities and Exchange Commission (SEC) requesting the regulator to convert its crypto funds into exchange-traded-funds (ETFs), which would allow them to trade in the public stock markets and thus improve their liquidity significantly.

The latest development comes amid strong speculations over the financial health of Grayscale and its parent firm Digital Currency Group (DCG). After the fall of crypto exchange FTX, DCG’s crypto trading firm Genesis has been facing major liquidity issues and has suspended repayments for an indefinite period.

Grayscale’s upper management has been trying to resolve the issue of hefty discounts. In a letter to investors last year, Grayscale CEO Michael Sonnenshein wrote that they will explore other options to return a portion of GBTC’s capital to shareholders” if they fail to convert their crypto funds to ETFs.

Not only Ethereum, Grayscale’s funds for other cryptocurrencies are also trading at such steep discounts. The Grayscale Bitcoin Trust (GBTC) is currently trading at an discount of 46% from the spot BTC price. Similarly, the Ethereum Classic Trust is trading at a 77% discount, followed by Litecoin trust at 65% and Bitcoin Cash Trust 57%.

There are only two Grayscale Trusts that are currently trading at a premium - the Filecoin Trust at 108% and the Chainlink Trust at 24%.

The Gemini crypto exchange has lashed out at the Digital Currency Group (DCG) since its lending arm - Genesis Global - owes $900 million to the clients of the crypto exchange. Gemini has given DCG a deadline of January 8 to work on the resolution for returning its clients funds.

Lashing out at DCG chief Barry Gilbert, Gemini co-founder Cameron Winklevoss wrote: "For the past six weeks, we have done everything we can to engage with you in a good faith and collaborative manner in order to reach a consensual resolution for you to pay back the $900 million that you owe. However, it is now becoming clear that you have been engaging in bad faith stall tactics”.