On-chain analytics platform Arkham Intelligence has discovered 500 crypto wallets linked to the ‘Grayscale Ethereum Trust’.
The Trust, which offers its investors passive exposure to the price of ETH, is the second largest entity in the world by tokens held, with an AUM of $4.9 billion.
The trust is currently trading at a 30% discount to its net asset value (NAV). In June alone, the discount was 55%.
See full details below.
Summary
Arkham Intelligence and Grayscale discover Ethereum Trust crypto wallet
Last week, Arkham Intelligence, one of the industry’s most advanced on-chain analysis platforms, made a sensational discovery by finding 500 crypto wallets linked to the Grayscale Ethereum Trust.
These are the words of Arkham’s insiders after the result:
“We were able to identify the addresses by analysing activity and cross-referencing with Grayscale’s public balances.”
The fund, run by Michael Sonnenshein, is the second largest holder of ETH tokens, with a value of around $4.9 billion.
Arkham, in its tracking operations that led back to Grayscale‘s tokens, noted that a maximum of $30 million is held on each address, with a total of 2.987 million ETH in the 500 crypto wallets.
The reason for this extreme diversification is probably for security reasons, so that even if a wallet were hacked and emptied, the fund would only lose 1% of the assets managed in the trust.
Other non-Ethereum ERC-20 tokens were also found in Grayscale’s various wallets, including 301,488 LINK, 263,888 UNI, 5.826 million BAT, 338.47 MKR, 4,999 AAVE, 91,488 SNX and 297,523 CRV.
The fund had only $65 million in ETH at the beginning of 2020, while by the end of the year it had grown to $2.2 billion.
The growth of the crypto market and the bullish outlook for Ethereum in 2020 attracted many investors who wanted to protect themselves from the adversities of the digital asset world and embrace a regulated and safe financial product.
In 2021, the fund continued to grow like crazy, with only a small dip in AUM in May, only to recover within a few months. The year ended with assets of USD 12 billion, although the all-time high of USD 15 billion was reached in November.
On the other hand, 2022, a bearish year for the entire crypto sector, led to a capital flight for Grayscale, which lost USD 8.3 billion.
In 2023, we see a brief recovery of $1.2 billion, supported by the rally in BTC and ETH at the beginning of the year and the latest market growth in June.
Grayscale Ethereum Trust: Trading at a 30% discount to NAV
The Grayscale Ethereum Trust (ETHE), which offers passive exposure to the price of ETH, is currently trading at a 30.14% discount to its net asset value (NAV).
Typically, an investment trust or exchange traded fund (ETF), while indirectly replicating the value of an asset, experiences a fluctuating price of its shares due to a variety of factors.
In general, if there is a belief that the market can explode upwards, the fund will trade at a premium, while if there is mistrust, it will trade at a discount.
At the moment, the Grayscale Trust is trading at a discount to its ‘fair value’ due to the obstacles in getting a spot ETF approved and the unstable conditions in the crypto sector.
However, it should be noted that the discount was only 55% in mid-June, compared with 60% in January.
Progress has therefore been made since the beginning of the year, reflecting increased investor confidence and a sentiment that, while still negative, is moving towards the positive.
The entry of BlackRock and other asset management funds into the sector and the various applications for a spot ETF on bitcoin and ethereum have certainly influenced the small rise in ETHE in 2023.
Michael Sonnenshein’s fund, which currently trades at an ETH price to market ratio of USD 10.68, could see a NAV premium of more than 100% by the end of 2020.
At one point, the value was as high as 947% above the cryptocurrency’s market price.
The downside came in early 2021, when the first negative discounts to NAV were recorded as the trust’s AUM grew.
The reasons for this steep decline are varied, but certainly related in part to the trust’s difficulty in ‘transforming’ into a full-fledged Exchange Traded fund and investor fears due to regulatory pressures in the US.
Grayscale’s Bitcoin Trust (GBTC), currently trading at a 20% discount to NAV, is following the same fate.
In December 2022, the trust’s managers had said they would look at various situations to return money to investors if they failed to get an ETF approved.
If the SEC approves the applications from BlackRock, VanEck, Wisdom Tree, Invesco and other hedge funds, we could expect to see a pumping up of the price of these funds, resulting in a discount to NAV and a possible return to a premium.
It is also worth noting that a few days ago Grayscale won a major court battle against the SEC, which is now obliged to reconsider Sonnenschein’s fund application.
However, it is too early to declare victory: Gary Gensler and his team can postpone their decisions for a few more months and devise strategies to reject the various fund applications.
The war is still on.
