Grayscale Files for Ether ETF Conversion, As First-Day Trading Starts with Lower-Than-Expected Volume

Grayscale, the investment management team behind some of the world’s biggest crypto funds, has moved to convert its Ethereum Trust (ETHE) into a spot exchange-traded fund (ETF). ETHE is the stock market’s largest Ether-based fund, with over US $5 billion ($7.86 billion)  worth of ETH held in reserve. Due to the current Trust-based structure of the fund, it trades at a massive 30% discount to the actual price of ETH – meaning that the issued shares only amount to around US $3.6 billion ($5.66 billion). Conversion to a spot ETF would likely bridge the gap and give investors a more accurate reflection of the day-to-day movement of the digital currency.

Bitcoin Trust and Regulation

Grayscale was the first investment firm to dabble in the crypto market, with the team releasing their Bitcoin Trust (GBTC) a decade ago in 2013. Over the past 12 months, Grayscale has moved to convert this fund into an ETF. Although they are yet to see approval from the SEC, Grayscale’s lawyers secured a big court victory over the regulatory body in August. It appears just a matter of time before spot-based crypto ETFs are formally approved.

According to Grayscale CEO Michael Sonnenshein, the Ether Trust evolving into an ETF was always intended as the fund’s “final stage.” The key difference between the two investment vehicles is redemption. Under the current trust structure, investors cannot directly redeem ETHE for ETH – hence the discount. However, an ETF allows investors to make redemptions, likely balancing the fund’s net asset value (NAV) and market cap.

Sonnenshein continued: “As we file to convert ETHE to an ETF…we recognize this as an important moment to bring Ethereum even further into the U.S. regulatory perimeter.”

New ETH Futures Hit the Stock Market to Lukewarm Reception

Grayscale’s ETF filing comes as a swathe of Ether-based futures funds hit the stock market for the first time. The results were underwhelming, with major players like Valkyrie and VanEck recording less than stellar trading volume. For example, VanEck’s Ethereum Strategy ETF (EFUT) saw less than half a million USD in trading volume. In contrast, ProShare’s Bitcoin Strategy ETF (BITO) boasted over a billion in trading volume on its first day on the market.

Bloomberg ETF analyst Eric Balchunas put it bluntly: “Pretty meh volume for the Ether Futures ETFs as a group”.

However, he later put his comments in context, suggesting that while volume was down it was far from disastrous.