Grayscale Ethereum Trust (ETHE) is trading at a premium of 725%, what does this mean?
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, by Summer, published with permission.
Over the past few months, Grayscale Investments has set new records. The firm is a digital asset fund manager best known for its two flagship funds: Bitcoin Trust (GBTC) and Ethereum Trust (ETHE).
This shows that despite the current global economic and social uncertainties, investors are turning to the cryptocurrency market.
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ETHE has a huge premium over the ETH spot market
When you buy Grayscale's ETHE, you are not buying the ETH asset itself. As the company's website data shows, each ETHE represents 0.09401903 ETH, and ETHE cannot be used to redeem its underlying asset ETH.
Due to the non-redeemable nature of ETHE, combined with the fact that it is the only Ethereum product traded on "traditional" investment platforms, this product tends to be priced at a much higher premium than the underlying spot market.
A well-known analyst shared[1] the chart below, showing that the rise in ETH prices over the weekend saw the trading price per ETHE soar during the June 2 trading session due to the influx of investment funds.
The analyst noted that at one point on June 2, ETHE was trading at $194 per share, while the value of the underlying ETH asset backing each ETHE share was around $23.50 at the time.
“This means $ETHE investors are buying $ETH at a whopping 725% premium,” the analyst said.
This means that investors who buy ETHE value ETH's market at as much as $230 billion, which is higher than Bitcoin's market cap of about $175 billion.
Eric Ervin, CEO of asset management firm Blockforce Capital, believes[2] that the high premiums seen in the market are a signal that “the public market wants access to cryptocurrencies like Ethereum”.
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This speaks to the intent of ETH investors
While the 725% premium may seem absurd, it reflects how cryptocurrency investors feel about Ethereum's prospects.
Garry Tan, an “early investor” at Coinbase, recently said that he “started accumulating ETH again,” adding in subsequent comments that he did so for “long-term holding.”
Meanwhile, the top 100 “whales” by ETH holdings have increased their holdings to their highest level in 10 months, storing $4.5 billion worth of ETH, according to previous reports. Blockchain analytics firm Santiment found that their ETH holdings increased by more than $30 million in value from May 25-27 alone.
While it's hard to pinpoint why cryptocurrency investors are so bullish, a series of fundamental events are boosting sentiment among ethereum investors.
In addition, some analysts have also observed a series of trends on the Ethereum blockchain showing bullish sentiment for ETH. Spencer Noon, head of cryptocurrency investment fund DTC Capital, listed these trends, some of which are as follows: Ethereum daily active addresses reached 380,000, indicating that the number of Ethereum users reached the highest level in two years; The value of the currency has exceeded 7 billion US dollars. In the past 3 months alone, 4 billion US dollars of stable coins have been issued on Ethereum; the current number of DeFi users has reached 178,000, compared with 90,000 just 5 months ago.
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