The Grayscale Ethereum Trust (ETHE) has shifted from trading at a discount to the net asset value (NAV) to a slight premium as of the potential listing of physical Ethereum exchange-traded funds (ETFs) in the United States.
This change is rather peculiar for ETHE, which had been trading at a discount for the past three years. As per the YCharts data, the premium of ETHE stood at 0.31% on July 3, just before the Independence Day holiday.
The level of the premium or discount to NAV reveals the spread between the market price per share and the price of ether per share. This shift to a premium indicates that investors are getting more interested and expectant for the debut of spot Ethereum ETFs.
Narrowing Discount Trend
The ETHE discount has been contracting since the crypto market found a bottom in December 2022. This trend has been fueled by speculations of the US Securities and Exchange Commission (SEC) approving spot Ethereum ETFs. The approval of Bitcoin ETFs in the early part of the year paved the way for the expectation of the same for Ethereum ETFs.
Although the gap increased between March and May, it drastically reduced soon after the SEC approved eight 19b-4 forms for spot Ethereum ETFs on May 3.
These approvals were given to some of the world’s largest financial institutions, including BlackRock, Fidelity, Bitwise, VanEck, Ark Invest, Invesco, Franklin Templeton, and Grayscale. However, these issuers require their S-1 registration statements to be effective in order to begin trading, which is expected to happen within the next few weeks.
Investor Anticipation for Spot Ethereum ETF
The transition from the discount to the premium is a sign of increasing investor interest and trust in ETHE shares, which might be linked to the anticipation of the ETF launch. This is similar to the situation before the Grayscale Bitcoin Trust (GBTC) was converted into an ETF this year. Apparently, investors are scooping up ETHE shares with the expectation of the positives associated with ETF conversion.
Wen spot eth ETF?
— Nate Geraci (@NateGeraci) July 3, 2024
BBG sticking w/ mid-July.
Amended S-1s due July 8th.
Potential final S-1s by July 12th.
Would theoretically mean launch week of July 15th.
via @emily_graffeo @olgakharif pic.twitter.com/NG8xhtCP21
Nate Geraci, president of The ETF Store, said he expects Ethereum ETFs to start trading as soon as July 15. He compared the SEC’s ETF approval for Ethereum with that of Bitcoin and said a possible decision could be reached by July 12. This timeline has boosted the investors’ confidence and investing activities.
Potential Market Impact
The launch of spot Ethereum ETFs will lead to the absorption of a large part of the circulating ETH, with estimates indicating that it could be between 0.75% to 1% of all the ETH in circulation within the first five months. This expectation aligns with the estimates made by several analysts, including those from K33 Research and Gemini.
However, the overall market has been bearish, with Ether prices falling below $3000 for the first time in 50 days on July 5. This decline can be attributed to a broader market correction occasioned by a rise in selling pressure, particularly on Bitcoin. Yet, the traders are unsure if the current bull market in the crypto space has come to an end before the ETF launch.
Ether’s price decline was in line with the rest of the cryptocurrency market, with the total market capitalization slipping under $2 trillion. However, this decline was driven by more selling pressure on Bitcoin and other large transactions; the Mt. Gox bankruptcy estate moved 47,229 Bitcoins, and the German government moved 7,583 Bitcoins.
The SEC’s Regulatory Developments
The SEC’s communication with Ethereum ETF applicants reveals that progress is still being made, and the most recent exchanges have been relatively simple questions.
The commission approved exchange proposals to list these products in May, indicating that the process is moving forward. Real trading, however, is subject to a separate subsequent authorization, which is expected shortly.
BlackRock, Fidelity, 21Shares, and Invesco are among the financial behemoths still awaiting approval for their Ethereum ETFs. Although aspects such as the fees of these funds are yet to be disclosed, it has been seen with much interest as to how these Ether portfolios will perform similarly to the U.S. spot Bitcoin ETFs that saw $52 billion in assets this year.
