In a recent regulatory filing, Grayscale announced its intentions to convert its Ethereum Trust into a spot exchange-traded fund (ETF). This move represents a significant shift in the company’s approach and has the potential to open up new opportunities for investors. The filing, dated March 15, includes several key amendments that strengthen the company’s case for the conversion.
Evidence of Market Correlation
One of the most compelling aspects of Grayscale’s latest filing is the inclusion of a correlation analysis conducted by Coinbase. This analysis provides evidence of a strong correlation between the CME ETH futures market and the spot Ethereum market. According to Coinbase, this correlation has been “consistently and highly correlated” for the past three years. This level of correlation surpasses that which the SEC found between the CME Bitcoin futures market and the spot Bitcoin market.
Another important aspect of Grayscale’s amendment is the expansion on the creation and redemption of ETF shares. Notably, the filing specifies that only cash creations and redemptions will be allowed. Authorized participants will not have the option to purchase, hold, deliver, or receive ETH directly. This approach aims to streamline the process and minimize potential risks for investors.
With the conversion of the fund to an ETF, Grayscale estimates that over $1.73 billion of value will be unlocked, significantly higher than the previously estimated $1.6 billion. Craig Salm, Grayscale’s Chief Legal Officer, emphasized the expected broad appeal of spot Ethereum ETFs. In a statement, he noted that investors “want and deserve access to Ethereum in the form of a spot Ethereum ETF,” highlighting the growing demand for this type of investment product.
Market manipulation and concerns surrounding creation/redemption methods have been key issues in the approval process for spot Bitcoin ETFs. Grayscale’s latest filing addresses these concerns in the context of Ethereum ETFs, providing a comprehensive framework for regulatory approval. Despite declining expectations, with Polymarket placing the odds of Ethereum ETF approval by the end of May at just 26%, Grayscale remains optimistic about the future of spot Ethereum ETFs.
Overall, Grayscale’s latest amendment represents a significant step forward in the evolution of Ethereum ETFs. By strengthening its case for conversion, providing evidence of market correlation, and addressing regulatory concerns, the company is paving the way for a new era of investment opportunities in the world of cryptocurrency.