Data has shown that Grayscale’s Ethereum Trust is currently trading at a huge premium against ETH’s net asset value, indicating that there’s a fair amount of FOMO following it.
While it’s still hard to determine whether the huge increase was caused by institutional or individual investments, traders should be careful when investing in products with such a high premium.
Grayscale’s ETH Trust Shows Incredible YTD Returns
Grayscale Investment’s Ethereum Trust has shown incredible returns this year, making it one of the most profitable trusts in the crypto industry. According to data from TradingView, the ETH investment vehicle, which is FINRA-approved and available to both retail and institutional investors, has shown year-to-date returns of almost 680%.
When compared to the 84% growth ETH showed on the spot market since the beginning of the year, this indicates that Grayscale’s trust is traded at an incredibly high premium.
Graph comparing YTD returns of Grayscale’s Ethereum Trust and ETH
Is The Premium a Result of Institutional or Retail FOMO?
Without more concrete data from Grayscale, it’s impossible to determine what exactly is the cause of the huge premium at which ETH is being traded. However, some members of the crypto community speculated that this could be a combination of both, given how the company has released several positive reviews of the world’s second-largest cryptocurrency.
Anthony Sassano, the co-founder of EthHub, noted that Grayscale released a detailed report on Ethereum back in February, saying that it was a “store of value.” The theory is corroborated by data, as the YTD returns on Grayscale’s ETH Trust spiked after the report was issued, most likely due to an influx of new money.
Institutions looking to gain exposure to Ethereum could also be behind the spike, as acquiring it through a firm such as Grayscale removes the need for custody.
However, despite the huge premium on the Trust, Grayscale said that eligible accredited investors can continue to purchase shares of its investment products, the Grayscale Bitcoin Trust and the Grayscale Ethereum Trust, at their net asset value.
REMINDER: eligible accredited investors may continue to purchase shares of our investment products, including Grayscale $BTC Trust and Grayscale $ETH Trust, at their respective NAVs.
To learn more or get started visit https://t.co/QVIMefv62B pic.twitter.com/9Jj6DVJJW9
— Grayscale (@GrayscaleInvest) June 3, 2020
Ethereum is also a direct beneficiary of the DeFi movement which has hundreds of distributed teams across the world building world-class new financial products that would have otherwise ceased to exist in the traditional financial systems like flash loans. Most of the DeFi development is currently being done on Ethereum’s platform, and with the platform’s growing exponentially the need for ETH will only go up.
Featured image from Shutterstock
Additional tags: ETHUSD, ETHBTC, ETHUSDT