Grayscale Ethereum Trust Plunges Over 50% as Ether Price Rises

Francisco Memoria

The price of the Grayscale Ethereum Trust (ETHE), which invests in the second-largest cryptocurrency by market cap ether, has plunged over 50% throughout the week, even though the price of ETH itself has been rising.

According to Bloomberg, Coin Metrics co-founder Nic Carter claimed the decline could be attributed to accredited investors such as hedge funds liquidating their holdings after their mandatory 12-month lockup for investment into the trust ended.

Carter added this means “extremely inefficient situations can develop like the one we’ve seen recently,” and that this was “bad news for retail investors that didn’t do their diligence.” Shares of the Grayscale Ethereum Trust are available to institutional and accredited investors, and were trading at an 800% premium to the net asset value, per Carter.

ETHE's price performance chartSource: TradingView

At press time, one ETHE share is trading at $92 after dropping 6.3%, with each share, according to Grayscale’s website, containing only 0.09387746 ETH (about $22) in it. While the price of ETHE shares dropped from over $200 to an $83 low before recovering to little over $90 this week, its underlying cryptocurrency performed in a very different way.

The price of ether, according to CryptoCompare data, went from $227 to $250 throughout the week, before enduring a correction that saw it plunge to a $229 low. At press time, the second-largest cryptocurrency is trading at $234.

Grayscale is a wholly-owned subsidiary of the Digital Currency Group, which is an investor in some of the best-known businesses in the space including Coinbase, BitGo, Abra, and CoinDesk. It sponsors various single-asset investment products that give institutional investors exposure to cryptoassets, and charges a management fee on these trusts.

They include the Grayscale Bitcoin Trust (GBTC). The Grayscale Ethereum Trust (ETHE)., Grayscale Bitcoin Cash Trust (BCHFUND), Grayscale Ethereum Classic Trust (ETCG), Grayscale Horizen Trust (ZENFUND), and a few more. Grayscale’s total assets under management surpassed the $4 billion mark earlier this month.

In a statement sent to Bloomberg, a Grayscale spokesperson said:

Grayscale does not control the prices at which our investment products trade in the public market but are instead subject to market forces

Featured image by Adam Nowakowski on Unsplash