Over the past year, the Grayscale Ethereum Trust has seen its discount to the net asset value (NAV) reach its narrowest point, currently hovering around 26.64%. This reduction in the discount comes as the United States considers applications for a spot Ethereum exchange-traded fund (ETF). This article explores the factors behind the narrowing of the Grayscale Ethereum Trust discount and the prospects for an Ethereum ETF in the U.S.
The Grayscale Ethereum Trust Discount
The Grayscale Ethereum Trust discount to NAV had previously reached an all-time high, with the discount soaring to 60% during a period of upheaval in the cryptocurrency industry earlier in the year. However, this trend began to change in July, coinciding with proposals for a spot Bitcoin ETF, which had its own fluctuations in discounts, ranging from 36% to 46%.
Moreover, in August, the U.S. Securities and Exchange Commission (SEC) received a wave of applications for Ethereum futures ETFs, raising hopes for the approval of an Ether ETF. Key moves by major financial players like ARK Invest and 21Shares toward launching the U.S.’s potential first spot Ethereum ETF have further contributed to the narrowing of the Grayscale Ethereum Trust discount.
Interestingly, Cboe’s application for an Ethereum ETF has involved Coinbase as a surveillance-sharing partner, aligning with recent trends in Bitcoin-related ETF applications.
Prospects for SEC Approval of an Ethereum ETF
Asset managers and the crypto industry at large are enthusiastic about the possibility of an Ethereum ETF. However, the SEC’s track record has been a hurdle, as it has not yet approved any futures or spot Ethereum ETFs.
Grayscale’s progress in this space has provided a glimmer of hope, with newer ETF applications referencing Grayscale’s achievements and incorporating elements from previous Bitcoin ETF proposals.
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James Seyffart, an ETF specialist at Bloomberg, suggests that issuers are testing the SEC’s boundaries, particularly concerning spot Bitcoin ETFs. While he anticipates a surge in applications, final decisions may be deferred until May 2024.
Taking a broader view, Nate Geraci, President of the ETFStore, believes that we will see combined spot Bitcoin and Ether ETF filings in the near future. He anticipates a gradual but eventual shift in this direction.
