Grayscale ethereum trust (ethe) and the grayscale bitcoin trust (gbtc) have been in the spotlight recently due to a record discount relative to the price of ethereum (eth) and bitcoin (btc) respectively. ethe and gbtc are managed by grayscale capital and allow traditional investors to gain exposure to the respective cryptocurrencies without investing in them directly. grayscale capital has roughly $3.6 billion in assets under management (aum). speculation over the financial health of grayscale and its parent company digital currency group (dcg) has arisen, as dutch cryptocurrency exchange bitvavo claimed in a blog post that dcg is “experiencing liquidity problems due to the current turbulence in the crypto market”.
Discount of ethe relative to eth has been steadily increasing since november 2021 and has now reached a record 59.39%. similarly, gbtc’s discount relative to btc is up from its record discount of 48.89% recorded in mid-december, now sitting at 45.17%. investors in these funds do not have access to the underlying cryptocurrency they are investing in. grayscale’s upper management has been trying to address this hefty discount, most notably grayscale ceo michael sonnenshein who wrote in a year-end letter to investors that it will “explore other options to return a portion of gbtc’s capital to shareholders” if it fails in its struggle to offer such funds as etfs.
Has been battling the sec since june for the right to convert its cryptocurrency funds into exchange-traded funds (etfs). this could improve their liquidity significantly and reduce the discount relative to the market prices. dcg claims that the liquidity issues discussed in the blog post from bitvavo are confined to genesis. ethe has lost roughly 68.37% of its value this year to date, as eth and other crypto assets have declined more broadly. this decrease in market prices could be one of the reasons for the large discounts in the grayscale funds.