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Why Grayscale Ethereum Trust Skyrocketed Today

By Jon Quast - May 3, 2021 at 4:02PM

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The trust holds one of the hottest cryptocurrencies there is.

What happened

Shares of Grayscale Ethereum Trust (ETHE -5.95%) skyrocketed on Monday. As of 3 p.m. EDT, shares of the trust were up 18%. Explaining this outsize move is simple: The trust holds popular cryptocurrency Ether, the tokens native to the Ethereum (ETH -3.16%) blockchain. And the price of Ether rose dramatically over the weekend and continues rising today.

So what

Each share of Grayscale Ethereum Trust represents about 1% of an Ether token. So the underlying asset value per share is about $33 as of this writing. That's roughly where shares are trading hands right now, meaning the move makes perfect sense.

Illustration of a  businessman riding a rocket ship expelling cash exhaust over a multicolored bar chart

Image source: Getty Images.

The price of Ether is up about 12% over the past 24 hours and up around 350% year to date, according to CoinDesk. Explaining this move isn't as straightforward as explaining the move with Grayscale Ethereum Trust -- there are a lot of factors in play when it comes to cryptocurrencies. However, note that Ether differs from more well-known cryptocurrency Bitcoin in a key way. With Bitcoin, many people treat it like digital gold, arguing it's a store of value. Others use it to buy and sell things. But with Ethereum, developers use the blockchain for things like building applications and writing smart contracts.

Lately, investors have been interested in non-fungible tokens (NFTs). At the risk of oversimplifying things, NFTs allow people to own unique, digital properties like digital art. And many NFTs are built on the Ethereum blockchain. Therefore, with the surging popularity of NFTs (among other things), Ethereum is actually being used more. Furthermore, Ether tokens make the Ethereum blockchain run, meaning they're in increasing demand. That demand is sending the price of Ether higher along with shares of Grayscale Ethereum Trust.

ETHE Chart

Year-to-date returns for Ethereum and Grayscale Ethereum Trust compared to the S&P 500. ETHE data by YCharts

Now what

While it's tempting to see something like NFTs as just a fad, it's possible there's more to it than that. Consider that big companies are now getting involved in this space. For example, in an interview on CNBC today, eBay's CEO said the company is looking to enable NFTs on its platform. For another example, even Intercontinental Exchange's New York Stock Exchange recently joined the NFT party

While it's hard to know for sure what will happen in coming months, I think it's fair to say that the digital services enabled by Ethereum will be in increasing demand in coming years. And adoption from companies like eBay and Intercontinental Exchange could help to further legitimize the space. If this is true, it's possible the price of Ether and Grayscale Ethereum Trust continue to rise over the long term.

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Stocks Mentioned

Grayscale Ethereum Trust Stock Quote
Grayscale Ethereum Trust
ETHE
$7.90 (-5.95%) $0.50
Ethereum Stock Quote
Ethereum
ETH
$1,151.13 (-3.16%) $-37.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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