The Grayscale Ethereum Trust (ETHE) has fallen to a record discount of -60% as fears over liquidations mount.
The discount to net asset value (NAV) had been between -25% and -35% up until early November when FTX collapsed. It has since plummeted to its lowest-ever level this week.
The Ethereum Trust is the firm’s second-largest, with $3.7 billion in assets under management (AUM). It holds around 3 million ETH, which is about 2.5% of its total market capitalization.
The ETHE fund is down 69% over the past year, according to Grayscale, but it has gained 49% since its inception in December 2017.
Every Grayscale trust and their respective premium % pic.twitter.com/TYQf5FmeXt
— db (@tier10k) January 3, 2023
Grayscale Liquidation Fears Mount
The asset manager’s flagship Bitcoin Trust (GBTC), is also in a world of pain. Its discount to NAV is currently -45%, also an all-time low according to Ycharts.
The Bitcoin Trust has $10.5 billion in AUM and holds more than 630,000 BTC. It is down 65% over the past twelve months but up a whopping 10,757% since its inception in 2013. Momentum for the GBTC fund could be reignited if the SEC approves its conversion to a spot exchange-traded fund this year. However, in the current crypto and regulatory environment, that is unlikely to happen.
Several of Grayscale’s altcoin funds are suffering even more so. Its Ethereum Classic Trust has a discount of -77%, while the Litecoin Trust is at a -65% discount. The ETC fund holds around 8.5% of the entire Ethereum Classic market capitalization, which puts the crypto asset at risk.
Other altcoin funds with more than a 50% discount to NAV include Basic Attention Token (BAT), Bitcoin Cash (BCH), and Livepeer (LPT). The only two trading at a premium at the moment are the Chainlink (LINK) and Filecoin (FIL) trusts.
Battling With Genesis
This week, Gemini co-founder Cameron Winklevoss lashed out at Digital Currency Group (DCG) CEO Barry Silbert over frozen funds. The exchange lent users’ funds to Silbert’s embattled Genesis brokerage, which halted withdrawals following liquidity issues after the FTX collapse.
DCG is Grayscale’s parent company which has raised liquidation fears. However, the assets in the Ethereum and altcoin trusts are not directly at risk yet. DCG’s position in the GBTC fund could be liquidated if the company is forced to repay its debts to Genesis creditors.
On Jan. 3, Three Arrows Capital (3AC) co-founder Zhu Su accused DCG of being criminally fraudulent.
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