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Grayscale Holds Discounted ETH Tokens: Will the Portfolio Survive the Denial of an Ethereum ETF?

In this post:

  • Grayscale ETH funds may hit the market depending on SEC decision for Ethereum ETF.
  • Funds in Grayscale wallets have been acquired near bear market lows.
  • Both fund approval and dismissal may lead to ETH selling.

Grayscale is sitting on a large wallet of Ethereum (ETH) acquired at discounted prices during previous market downturns. The Grayscale Ethereum Trust is now awaiting a verdict on whether it could transform into an ETF. In case the ETF proposal is declined by the US Securities and Exchange Commission (SEC), Grayscale may end up with ETH to spare and sell for profit. 

The SEC has to decide on an ETH ETF this week, a relatively minor event. Grayscale itself has gone through multiple bull and bear cycles and has traded at a discount to the crypto market because of low user interest. 

Also read: Experts Raise Their Expectations for Approval of Spot Ethereum ETF by 50%

The investments in the Grayscale Ethereum Trust are in the green. Grayscale has not shared plans about its holdings, which secure the tradable shares of the Ethereum trust. Users are speculating about a sale or another transformation for the funds. 

The waiting period for the new ETF decision coincides with a price rally, which sent ETH to $3,647.41. The price rally is seen as an early sign that ETH may finally be approved after years of deliberation by the SEC on whether the asset was an unregistered security. 

Grayscale Ethereum Trust Trades at Discount

Even after the ETH rally, the ETHE-wrapped asset traded at a discount. The OTC-traded fund still rallied by more than 23%, reaching $28.71. Since Grayscale holds 10% crypto assets for each ETHE share, the price is equivalent to ETH at $2,800. 

The Grayscale funds often trade at a discount, with short periods of premium prices compared to the crypto market. 

Source: OTCQB markets

During the latest rally, the OTC market responded quickly with a near-vertical climb. 

Ethereum Trust Holds $10.9B in ETH Value

Grayscale’s Ethereum Trust holds more than 2.9M ETH tokens, valued at $10.94B after the latest market rally. The Grayscale portfolio is one of the biggest in crypto, though it is hard to track for being distributed to multiple small addresses. 

All the Grayscale ETH is movable and not staked or tied up in decentralized finance. Grayscale Holdings has also been making a solid profit since late 2020. 

Some addresses were mapped in late 2023, showing the approach to holding ETH for Grayscale. 

In case of an ETF approval, the same ETH will serve as the basis for the new product, as the exchange-traded trust transforms.

Some of the Grayscale ETH has been picked up during market lows, where ETH slid as low as $90 during some of the crashes. Additionally, in 2019, Grayscale acquired more than 226K ETH at an average price of $212.

What is the Scenario in Case of ETF Approval?

One of the possible scenarios is that the ETF proposal is dismissed or delayed, and both Grayscale’s fund and ETF continue as normal. The other scenario is that ETH continues its bullish climb, fulfilling predictions of $6,000 prices during the summer months. 

In that case, a sale of ETH is also possible, as some of the early investors may realize gains. 

At the same time, new buyers will have to absorb the ETH at a much higher price. The Ethereum market has benefitted from low selling, where a large amount of ETH is locked or used in decentralized finance. Grayscale has the ability to put actual coins directly on the market, most likely through Coinbase, its main channel for onboarding and selling.

The ETF approval is still not guaranteed, as Grayscale recently withdrew one of its product requests with the SEC, for a derivative ETF. 

Grayscale has also used some of the ETH held from the past to flow into its Litecoin exchange-traded trust, which is also one of the early mainstream tools for crypto investment.


Cryptopolitan reporting by Hristina Beeva

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Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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