Grayscale looks to convert discounted $5B Ethereum trust to spot ETF

Grayscale has moved to convert its Ethereum Trust (ETHE) into a spot exchange-traded fund (ETF).

In an Oct. 2 statement, the crypto asset investment product said the New York Stock Exchange Arca filed Form 19b-4 with the U.S. Securities and Exchange Commission (SEC) to convert its Ether Trust into a spot ETF.

The filing is coming on the heels of the SEC’s approval of several Ethereum futures ETFs.

Grayscale CEO Michael Sonnenshein said the move further indicated the firm’s “unwavering commitment to offering investors transparent and regulated access to crypto through product structures that are familiar.” He added:

“As we file to convert ETHE to an ETF, the natural next step in the product’s evolution, we recognize this as an important moment to bring Ethereum even further into the U.S. regulatory perimeter.”

Grayscale Ethereum Trust was launched in March 2019 and has grown to become one of the largest Ether investment vehicles in the world. Per its website, the assets under management of the fund sit at approximately $5 billion, representing 2.5% of all Ether in circulation.

Meanwhile, Grayscale recently scored a landmark victory over the SEC due to the regulator’s reluctance to approve the transition of its Grayscale Bitcoin Trust (GBTC) into an ETF.

ETHE discount

Like GBTC, Grayscale’s ETHE trades at a significant discount to the net asset value (NAV), currently around 31%, according to Coinglass data.

The ETHE discount peaked near 60% in January and has mostly stayed around 40-50% for most of the year. However, the metric began a significant descent after BlackRock submitted its application for a Bitcoin spot ETF in June. The decline continued, reaching its lowest level in a year, following Ark Invest’s application for an Ethereum spot ETF in early September.

Currently, Grayscale’s ETHE configuration does not support redemptions, a factor contributing to its trading discount. However, the proposed transition from a trust to an ETF, which inherently allows share redemptions, could potentially eliminate this discount.

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