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Friday, January 22, 2021

Why is Grayscale Ethereum Trust (ETH) (OTCMKTS:ETHE) In a Bearish Trend?

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The Bitcoin rally over the past weeks has taken the crypto space by storm. However, it should not be forgotten that Ethereum, the world’s second-biggest cryptocurrency by market cap, has also had a remarkable rally in recent days.

Ethereum has rallied by as much as 75% over the course of the past 15 days, but that has not come as a boost for the Grayscale Ethereum Trust (ETH) (OTCMKTS:ETHE).

Key Reasons

The underlying asset in the fund is Ethereum but the ETHE stock has plunged by as much as 40% over the course of the past fortnight. A share in ETHE offers an easy way for investors to get exposure to Ethereum.

However, it is easy to see why the ETHE share price might have crashed so spectacularly. An ETHE share is trading for $14.80 and that equals $0.09620794 units of an Ethereum token. That reflects a considerable premium of 21% when compared to the spot price of an Ethereum token.

The shares in the trust have had a wild ride in recent months. At the start of October last year, the ETHE share started the rally that saw it gain as much as 500% and eventually hit $50 a share in December.

However, the shares have had a pretty tough time since then and declined steadily to eventually hit the current levels. There is another theory doing the rounds with regards to the current drop in the ETHE stock.

The Chief Executive Officer of the crypto data aggregator TheTIe, Joshua Frank took to Twitter and presented his theory. He stated that institutional arbitrage may be at play with regards to the rally in Ethereum and the decline in the price of ETHE stock. He stated that investors are actually buying Ethereum in order to close out the loans that they may have taken in order to buy ETHE shares.

Disclaimer: We hold no position in ETHE stock.

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