Grayscale Ethereum Trust Fund sees a 725% premium, surging over six times compared to the beginning of the year.

Currently, the only Ethereum security product on the market is the Grayscale Ethereum Trust Fund (ETHE), with a price increase of over 600% since the beginning of the year, and a premium of 725% compared to its net asset value. This trend seems to indicate a strong interest from traditional investors in Ethereum investments.

Grayscale Fund Continues to Grow

According to previous reports, the U.S.-based digital asset management company Grayscale Investments has experienced explosive growth in fund size. In just the first quarter of this year, the company acquired investments worth over $500 million from most traditional investors.

99% of this was allocated to expanding the fund size of the Bitcoin Trust Fund (GBTC) and the Ethereum Trust Fund (ETHE). According to data from the Grayscale website, the Bitcoin fund size is currently around 362,000 units, while Ethereum has reached 1.4 million units. This situation indicates that institutional investors' interest in the cryptocurrency market continues to rise.

Recently, the significant premium of Grayscale's ETHE in the trading market indirectly confirms this point.

ETHE Premium of 725%

ETHE is a "closed-end trust fund" designed for institutional investors. Investors can buy and sell its fund shares on the securities market but cannot directly request redemption of the investment fund. In other words, when investors buy ETHE, they are not actually purchasing real ETH.

Due to its lack of redeemability and being the only Ethereum security product tradable on traditional financial platforms, ETHE's price typically experiences a premium compared to the underlying spot market (ETH).

The following chart shows the price performance of ETH spot versus ETHE. It is evident from the chart that while ETH prices rose on June 2nd, ETHE's stock price saw a more significant surge.

Moreover, compared to the beginning of the year, ETHE has already risen by 669.83% in the market price.

Investor Confidence in Ethereum

While the act of buying Ethereum products at a 725% premium may seem hard to understand, ETHE itself is the only compliant "security product" in the traditional financial market. Traditional investors who are reluctant to bear the risk of holding coins or exchange collapse (cryptocurrency exchanges on the market are too new for traditional investors and lack confidence), and some investors who are responsible for managing small funds (such as family funds) may have provisions in their contracts that prevent them from investing in cryptocurrencies. Since ETHE is legally considered a security, it becomes the only choice for these investors. However, all of this relies on traditional investors having confidence in the future price of Ethereum.

According to previous reports, Garry Tan, an investor in the seed round of the cryptocurrency exchange Coinbase, recently announced on Twitter that he has started accumulating ETH again, preparing for long-term holding.

Started accumulating $ETH again

— Garry Tan 陈嘉兴 (@garrytan) May 31, 2020

Furthermore, data provided by the on-chain data platform Santiment indicates that more and more large holders are beginning to accumulate Ethereum. According to the data provided by the platform, the total holdings in the top 100 Ethereum wallet addresses (by balance size) have reached a new high in the past 10 months, with assets totaling over $4.5 billion.

Although it is difficult to determine why traditional investors are so bullish on Ethereum, all signs indicate that the number of Ethereum holders and investors is steadily increasing.