- As the May deadline for spot Ethereum exchange-traded fund (ETF) applications in the U.S. approaches, shares of Grayscale’s Ethereum Trust (ETHE) appear to be stabilizing.
- Despite doubts from analysts about the approval of spot Ethereum ETFs in the U.S., the Securities and Exchange Commission (SEC) will have to respond to its earliest applications by May 25.
- Approval odds for spot Ethereum ETFs have dropped from 76% in January to 6% on Monday, according to prediction platform Polymarket.
As the deadline for Ethereum ETF applications in the U.S. nears, shares of Grayscale’s Ethereum Trust show signs of stability. Despite the declining odds for approval, the SEC is set to respond to the earliest applications by May 25.
Grayscale’s Ethereum Trust Shares Stabilize
As of Friday, shares in Grayscale’s ETHE traded at a 22% discount relative to the funds’ crypto holdings, according to data from YCharts. Since March 22, that discount has ranged between 21% and 26%, widening from as little as 8% earlier that month. Mark Connors, head of research at digital asset investment firm 3iQ, suggests that ETHE’s steadying discount reflects “not only pricing in the downside of regulation, but [also] the upside of industry action.”
Declining Approval Odds for Spot Ethereum ETFs
Many crypto market analysts have expressed doubt that spot Ethereum ETFs will be approved in the U.S. in the short term. The SEC will be required to respond to its earliest applications for such a product from asset manager VanEck by May 25. However, approval odds for spot Ethereum ETFs in May have declined from 76% in January to 6% on Monday, according to traders on the prediction platform Polymarket.
ETHE’s Discount and the Potential for a Repeat Trade
As to why ETHE’s discount has remained little changed over the past several weeks, Connors said some could be posturing for a repeat—even if that means holding ETHE through any litigation that might follow the expected denials from the SEC. “People have been rewarded for that,” Connors said, referencing institutions that traded GBTC through its eventual conversion to an ETF. “There’s a load of hedge funds that know this trade.”
Conclusion
With the deadline for Ethereum ETF applications in the U.S. fast approaching, the crypto market is on edge. The odds for approval have declined significantly since the start of the year, but the SEC’s response to the earliest applications is eagerly awaited. Meanwhile, shares of Grayscale’s Ethereum Trust appear to be stabilizing, potentially signaling a repeat of the GBTC trade that rewarded many investors.
