Grayscale Ethereum Trust discount to NAV quietly switches to a premium ahead of anticipated spot ETF launch

The Grayscale Ethereum Trust (ETHE) has quietly shifted from a discount to a premium to its net asset value (NAV) in anticipation of a spot ETF launch. On July 3, the ETHE premium to NAV reached 0.31%, according to YCharts data.

Historically, ETHE had been trading at a discount for the past three years. However, as of July 3, it reached a premium just before the Independence Day holiday, as shown by YCharts.

The premium or discount to NAV indicates the market price of each share relative to the value of the ether it represents. The ETHE discount had been narrowing since the crypto bear market bottom in December 2022, fueled by speculation about the U.S. Securities and Exchange Commission’s (SEC) potential approval of spot Ethereum ETFs, following the launch of Bitcoin spot ETFs in January.

Despite a brief widening between March and May, the ETHE discount significantly narrowed after the SEC approved eight 19b-4 forms for spot Ethereum ETFs from BlackRock, Fidelity, Bitwise, VanEck, Ark Invest, Invesco, Franklin Templeton, and Grayscale on May 23.

However, these issuers still need their S-1 registration statements to become effective before trading can begin, which is expected within the next few weeks. Until now, ETHE had remained at a slight discount to NAV. The trust previously traded at a discount because shares could not be redeemed, meaning shareholders had to sell to other prospective buyers. Historically, ETHE traded at a premium until the 2021 crypto credit crunch.

The closing of the discount suggests the imminent launch of spot Ethereum ETFs, with investors buying discounted shares ahead of a potential ETF conversion of the Ethereum Trust, similar to the Grayscale Bitcoin Trust (GBTC) before its conversion to an ETF in January.

Currently, ETHE holds $9.5 billion in assets under management, according to Grayscale.