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 reduction in the discount has a meaning. 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 contraction
Last year, Grayscale Ethereum Trust’s discount to net asset value (NAV) reached its narrowest point. It 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 an upheaval marked by the collapse of several crypto-centric firms. This turmoil resulted in a significant increase in the NAV discount. Accordingly, it rose to an astonishing 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%.
The SEC’s role in approving the 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 has designated Coinbase as its custody-sharing partner, draws attention. Accordingly, it is in line with the latest trends seen in Bitcoin-related ETF filings.
The enthusiasm for an Ethereum ETF among asset managers is palpable. But the SEC’s historical stance remains a challenge. The American regulatory authority has yet to approve any futures or spot Ethereum ETFs. That said, Grayscale’s progress in this area is noteworthy. 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 the limits
James Seyffart, Bloomberg’s ETF expert, makes a statement on the subject. He argues that issuers are testing the limits of the SEC, especially when it comes to spot Bitcoin ETFs. While an influx of applications is expected, concrete results may not materialize 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.” makes the comment. 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.
