Grayscale Moves $1 Billion into Ether Mini ETF Ahead of Ethereum ETF Launch

Asset manager Grayscale was identified moving $1b in Ether as it prepares to transform its multibillion-dollar Ethereum Trust into two ETFs with varying fees.

It follows the SEC approving several spot Ethereum ETFs to begin trading on Tuesday, July 23. These include ETFs from 21Shares, Bitwise, BlackRock, Fidelity, Franklin Templeton, VanEck, and Invesco Galaxy, all launching after weeks of revisions to their registration statements.

On Tuesday, blockchain monitoring service Whale Alert noted that an unidentified wallet moved 292,262 ETH, worth more than $1b, to Coinbase Institutional.

Bloomberg ETF strategist Eric Balchunas suggested that Grayscale is transferring funds from its Trust to its new Grayscale Ethereum mini-ETF. The amount could likely be seed capital for the mini-Trust. According to its website, the Grayscale Ethereum Trust currently holds 2.6m ETH.

Eth ETF race has already begun w/ a transfer from $ETHE to its mini-me = $ETH gonna begin its life w/ $1b and a category-low 15bp fee. That’s a new variable in this race that we didn’t have in btc race. https://t.co/7v6kh8Kw5Q

— Eric Balchunas (@EricBalchunas) July 22, 2024

Mini Ethereum Trust Targets Retail Investors with Lower Prices

Grayscale plans to transform its Ethereum Trust (ETHE), which manages roughly $10b in assets, into an ETF while maintaining its current 2.5% fee. Additionally, the firm has structured its Mini Ethereum Trust (ETH) to allocate 10% of ETHE’s ether holdings to this more affordable product.

The Grayscale Ethereum Mini Trust (ETH) is aimed at attracting retail investors. Each share of this mini trust, distinct from Grayscale’s primary ether ETF (ETHE), provides a smaller portion of the underlying ether compared to its larger counterpart. Thus, its price is correspondingly lower.

Challenges in ETF Documentation

Meanwhile, Bloomberg ETF analyst James Seyffart noted that Grayscale’s ETHE and ETH are the only funds in the Ethereum ETF race lacking official effective documents from the SEC. He mentioned that the process of spinning off $ETH from $ETHE involves more complexity than starting entirely new funds, making the finalization of these documents potentially more intensive.

The spinoff situation of $ETH from $ETHE is definitely more complex than just launching completely new funds so it would be logical that finalizing those docs might be a little more intensive but i really don't know.

(this is my current guess for what's going on)

— James Seyffart (@JSeyff) July 22, 2024

All spot Ether ETFs, excluding the Grayscale Ethereum Trust, will have a base fee ranging from 0.15% to 0.25%. Additionally, the Grayscale Ethereum Mini Trust plans to waive fees for the first six months or until it accumulates $2b in net assets, whichever happens first.