By
Temitope Olatunji
April 23rd, 2024
Along with the Ethereum Trust, several other Grayscale products are trading at steep discounts recently as parent firm DCG is grappling with liquidity issues.
The shares of the Grayscale Ethereum Trust (ETHE) have been on a steep decline and have dropped by more than 90% since its all-time high in 2019. Currently, the Grayscale Ethereum Trust has been trading at a massive 60$ discount to its underlying asset value.
Grayscale Ethereum Trust (ETHE)
Managed by Grayscale Capital, ETHE allow investors to gain exposure to Ethereum without investing in the underlying asset. This is typically for institutional investors looking to seek exposure to crypto assets via a regulated environment.
The Grayscale Ethereum Trust (ETHE) has nearly $3.6 billion in assets under management and has lost roughly 68.37% of its value over the last year. This comes amid the major correction in the price of ETH as well as the broader crypto market.
The latest development comes amid speculations concerning the financial health of Grayscale and its parent firm Digital Currency Group (DCG). Last month in December, Dutch crypto exchange Bitvavo said that DCG has been “experiencing liquidity problems due to the current turbulence in the crypto market”. It further noted that DCG has “suspended repayments until this liquidity issue has been resolved”.
However, DCG noted that these liquidity issues remain confined to its crypto trading organization Genesis Global. Grayscale’s upper management is now trying to address this liquidity issue arriving at their end. In his recent letter to investors, Grayscale CEO Michael Sonnenshein said that they would explore “other options to return a portion of GBTC’s capital to shareholders” in case it fails to offer funds like the ETFs.
Several Grayscale Products Trading at Steep Discounts
Along with ETHE, the Grayscale Bitcoin Trust (GBTC) has also been trading at a steep discount of 45%. Besides, several other Grayscale Trust Funds have been trading at a discount. For e.g. the Ethereum Classic Trust is currently trading at a 77% discount, Litecoin Trust at 65%, and Bitcoin Cash Trust at a 57% discount.
Only two Grayscale Trusts are currently trading at a premium which includes the Filecoin Trust at 108% and the Chainlink Trust at 24%.
Every Grayscale trust and their respective premium % pic.twitter.com/TYQf5FmeXt
— db (@tier10k) January 3, 2023
In a report on Tuesday, January 3, crypto research firm Arcane Research stated that DCG and Genesis Global owe a significant debt to crypto exchange Gemini. This could lead to DCG initiating a Reg M distribution. This would be particularly bad for the crypto market but good for ETHE.
“A Reg M would cause a massive arbitrage strategy of selling crypto spot versus buying GrayscaleTrust shares. If this scenario plays out, crypto markets could face further downside,” noted Arcane Research.