Ether Trust Shares Drop 50% as Liquidity Rises Post Compulsory Lockdown Period

Shares of Ethereum Investment Trust (ETHE), a fund owned and operated by Grayscale, have plunged 50% in a matter of four days on the OTC (over-the-counter) markets.

As each share represents 0.094 Ether (ETH), the sharp reversal has resulted in a fall in the trust shares’ price premium to 360%, from 750% in less than a fortnight.

ETHE’s prevailing price of $102.50 implies that investors are comfortable in paying a corresponding price of $1,090 per Ether in an attempt to access ETH via the trust on the secondary market.

The price decline took at the same time when several ETHE shares that were bought on the primary issue were unfrozen after a 12-month compulsory lockup period. The expiry considerably increased liquidity in the secondary OTC markets.

Enthusiasm surrounding Ethereum’s upcoming ETH 2.0 upgrade seems to be mirroring in the price of ETHE shares, which recently traded for an implicit price of $2,905 per Ether.

If ETH trades at that price then its market cap would skyrocket to $323 billon or roughly double that of Bitcoin (BTC).

Nevertheless, last week, shares of Grayscale Ether plunged with ETHE slumping to a low of $80, from a high of $204, before reversing to trade above $100. The increase in selling momentum in the ETHE markets has not affected Ether’s spot price, with ETH effectively recording small gains as prices moved between approximately $230 and $245 in the last four days.

Grayscale’s Ethereum Investment Trust facilitates institutions to have an exposure in Ether, while looking after custody, buying, tax obligations and other legal and technical formalities linked to cryptocurrency investments.

By early June, Grayscale had acquired $110 million worth ETH in 2020, matching about 0.4% of Ethereum’s entire market cap in a matter of five months.