The shares of Etheruem Trust of grayscale have lost 50% in the past 2 weeks mainly due to the long-term arbitrage that is in the hands of the institutional investors. On the other hand, ETH has rallied off almost 75%.
The shares in Ethereum Trust which is the fund manager of Grayscale Investments have plummeted by over 50% in the last fortnight. Even though Ethereum has rallied over 75% during the same span of time.
Downfall Of ETHE Shares
ETHE shares indicate 0.09620794 to each ETH and are presently trading at $13.80 which is at a premium of nearly 21% more than the spot price of Ether.
At the beginning of October, shares of Grayscale had experienced a massive tumult and chaos as they spiked after $4.20 by almost 500%. This happened prior to surpassing $25 on 22nd December 2020. Since the shares have declined by 50% and posted a low of almost $12 on 5th January 2021.
Joshua Frank is the CEO of TheTie which is a crypto data analytics. He has recently made a tweet in order to provide a theory by which he wants to explicate the strange action of price.
Frank has stated that the institutional arbitrage might be one of the reasons behind the recent increasing gains of ETH. He also speculated that the investors might also be buying ETH in order to close out the loans that were taken to buy the shares in Ethereum Trust.
He also indicated that several investors of Ethereum Trust have borrowed ETH at 8% annual interest before using the loan assets to buy ETHE shares for the spot price of ETH. This helped in capitalizing the arbitrage offered by the record price premium of ETHE.
