Grayscale Ethereum Trust has witnessed a significant reduction in its discount. Accordingly, it reached the lowest level of a year with 26.64%. This significant contraction in discounting makes sense. It coincided with a surge in applications for the first spot Ethereum exchange-traded fund (ETF) in the United States. It also created anticipation in the crypto community.
Understanding discount shrinkage
Last year, Grayscale Ethereum Trust’s discount to net asset value (NAV) reached its narrowest point. This needs to be put in context. According to YCharts data, it last approached these levels in September 2022, with a 24.53% NAV discount. There are factors that contribute to the narrowing of the discount.
Earlier this year, the cryptocurrency industry experienced turmoil marked by the collapse of several crypto-centric firms. This turmoil caused a significant increase in the discount to NAV. Accordingly, it rose to a staggering 60%. However, the situation began to change in July when mainstream financial giants led by BlackRock proposed the spot Bitcoin ETF concept. During this period, the discount fluctuated between 36% and 46%.
SEC’s role in approving Ethereum ETF
Moreover, a recent increase in filings for Ethereum futures ETFs with the U.S. Securities and Exchange Commission (SEC) in early August has sparked hopes of approval of an Ethereum ETF. This optimism has been further fueled by strategic moves by ARK Invest and 21Shares to potentially launch the first US spot Ethereum ETF. Cboe’s application, which designated Coinbase as its custody-sharing partner, attracts attention. This is consistent with recent trends seen in Bitcoin-related ETF applications.
The excitement among asset managers for an Ethereum ETF is palpable. But the SEC’s historical standing remains a challenge. The American regulatory authority has not yet approved any futures or spot Ethereum ETFs. However, Grayscale’s progress in this area is remarkable. It paints an encouraging picture, with new applications citing Grayscale’s successes and incorporating elements from previous Bitcoin ETF offerings.
It’s a test of limits
Bloomberg’s ETF expert James Seyffart makes a statement on the subject. It suggests that issuers are testing the SEC’s limits, especially regarding spot Bitcoin ETFs. While an influx of applications is expected, concrete results may not occur until May 2024.
ETFStore President Nate Geraci takes a broader perspective. Accordingly, “we will see spot Bitcoin and Ethereum ETF applications together in the very near future.” Gradually, then suddenly.” He comments. This sentiment reflects the industry’s expectation of significant developments in the ETF space. When we look at Kriptokoin.com, both Bitcoin and Ethereum play important roles in the future of financial markets.
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