Later this week, shares of the Grayscale Bitcoin Trust started trading at a discount after years of negotiating with a premium. Now, the Grayscale Ethereum Trust is also being negotiated at a discount for the first time since its opening in 2017.
The investment product, which is available in over-the-counter markets with the ETHE symbol, traded at a 5.2% discount yesterday; it is usually traded with a premium above 5%.
The Grayscale Ethereum Trust is an investment vehicle that takes investors’ dollars and uses them to buy Ether. But, instead of investors receiving this Ether, the gray scale keeps it in their name and issues actions designed to track the price of ETH.
However, there is a small problem: ETHE’s shares are rarely traded at the same price as the real ETH. Typically, they cost more than the underlying asset.
There are a few reasons for this, the biggest one being that the gray scale charges an annual fee of 2.5%. Some investors pay because the trust is a regulated product and the gray scale takes the risk of owning the keys. The gray scale works extraordinarily well with this model; the trust controls 3.17 million ETH, more than 2.7% of the current ether stock.
One factor influencing the recent discount may be the six-month waiting period before investors can turn around and sell their shares. As said by Darius Sit, CIO at QCP Capital Decrypt yesterday, with respect to the grayscale Bitcoin Trust, the prize often falls as trading tables draw and claim their prizes.
“Trading the GBTC at a discount from the Bitcoin price does not necessarily indicate bearish outlets,” he said.