Grayscale’s ETHE discount to NAV hits lowest level since 2021 amid growing optimism for Ethereum ETF approval

The Grayscale Ethereum Trust (ETHE) discount to net asset value (NAV) has narrowed to its lowest level in over two years amid newly optimistic outlook for a spot ether exchange-traded fund approval by the Securities and Exchange Commission.

Discount to NAV indicates how much lower the market price of each share is compared to the value of the ether it represents. It fell to -6.7% by market close yesterday—the lowest since December 2021, according to YCharts data.

The narrowing discount may be considered as a gauge for the likelihood of spot Ethereum ETF approvals, with investors seemingly buying up the discounted shares ahead of a potential ETF conversion — as was the case with the Grayscale Bitcoin Trust (GBTC) before its conversion to an ETF in January.

The Ethereum Bitcoin Trust trades at a discount because the shares cannot currently be redeemed, meaning the only option for shareholders is to sell them to other prospective buyers. However, it historically traded at a premium until a crypto credit crunch in 2021. ETHE currently holds $10.9 billion in assets under management.

Analysts increase odds of spot Ethereum ETF approval

As of the market close yesterday, ETHE shares were trading at $32.76, according to Trading View. The Grayscale Ethereum Trust is up 41.2% this week compared to 22.9% for ether itself after Bloomberg ETF analysts Eric Balchunas and James Seyffart dramatically raised their odds of spot Ethereum ETF approvals from 25% to 75% on May 20 in a turnaround of broad market consensus.

On Friday, the ETHE discount to NAV was -20.5%, narrowing sharply after the news to close at -11.8% on Monday.

The sudden change came amid signs of a 180 from the SEC, Balchunas said — with crypto increasingly becoming a political issue. The SEC has only asked for minor updates to the important 19b-4 forms for prospective spot Ethereum ETFs, a source told The Block on Tuesday.

The removal of staking rewards seems to be key in the process, with Grayscale following other firms in eliminating all staking language from its spot Ethereum ETF proposal on Tuesday.

The SEC has key deadlines on Thursday and Friday to decide whether to approve the applications for spot Ethereum ETFs submitted by VanEck and Ark Invest, respectively. Hashdex, Invesco, Fidelity, BlackRock, Franklin Templeton and Bitwise are also among spot Ethereum ETF applicants.