1. The Grayscale Ethereum Trust (ETHE) has fallen to a record discount of -60%, putting pressure on the world’s largest institutional crypto fund manager, Grayscale and its parent company.
2. The trust holds 3 million ETH, which is about 2.5% of its total market capitalization, and has declined 69% over the past year.
3. The discount to net asset value (NAV) had been between -25% and -35% up until early November when FTX collapsed.
Grayscale is the world’s largest institutional crypto fund manager and its parent company is feeling the pressure as the Grayscale Ethereum Trust (ETHE) has fallen to a record discount of -60%. The trust holds 3 million ETH, which is about 2.5% of its total market capitalization and has declined 69% over the past year. The discount to net asset value (NAV) had been between -25% and -35% up until early November when FTX collapsed. This week, the discount sunk to its lowest-ever level.
The ETHE fund is down 69% over the past year, according to Grayscale, but it has gained 49% since its inception in December 2017. Every Grayscale fund, including ETHE, has a 2% annual management fee. This fee is deducted from the NAV of the fund and is the primary reason for the discount to NAV.
The Ethereum Trust is the firm’s second-largest, with $3.7 billion in assets under management (AUM). Since the trust’s inception, the price of Ethereum has been volatile and has experienced numerous peaks and valleys. Ethereum’s price is also heavily influenced by the broader cryptocurrency markets and the sentiment of investors.
In addition to the management fee, there are other factors that contribute to the discount. The fund’s liquidity is an issue, as the fund is not as liquid as it once was. Investors must also consider the risk of liquidation, which could lead to further discounts.
The discount to NAV is a concern for investors, as it indicates that the fund is overvalued or the market is underestimating the value of the underlying assets. Given the current market conditions and the volatility of Ethereum, it is unlikely that the discount will narrow anytime soon.
Overall, the discount to NAV is a sign of the times for the Grayscale Ethereum Trust and it is likely that the discount will remain in the near-term. The fund’s management fee and its lack of liquidity are major contributors to the discount, and investors should be aware of the risks associated with investing in the fund. Despite the discount, the fund remains an attractive option for those looking to gain exposure to Ethereum.