The Net Asset Value (NAV) premium of Grayscale's Ethereum Trust (OTCQX:ETHE) has declined from 949% on June 4 to roughly 163% today. Because no cryptocurrency ETFs trade on U.S. exchanges, trusts can trade at substantial premiums to their underlying assets.
About cryptocurrency trusts:
- Trusts allow institutional investors to acquire the underlying assets of a trust (e.g. bitcoins) and then participate in private placements, creating new trust units. Following customary lock-up periods, they can sell their units to retail investors, often at a premium to NAV.
- ETHE has also filed a Form 10 seeking SEC approval to reduce its lock-up period from 12 to 6 months,
- The 163% NAV premium of ETHE is substantially higher than the NAV premium of Grayscale Bitcoin Trust (OTCQX:GBTC), which has declined from its high of 31% on June 10 to roughly 17% today.
- ETFs are more robust, dynamically adjusting assets according to inflows.
- The SEC has rejected all cryptocurrency ETF applications to date.