Ben Strack

Grayscale Investments wants to morph its Ethereum Trust into an ETF, a move that parallels a proliferation of ETH-related fund applications.



The news came in a Monday filing by NYSE Arca, the exchange that would list the planned fund. Shares of the Grayscale Ethereum Trust (ETHE) currently trade on the OTC Markets Group under the ticker ETHE.&nbsp;



ETHE has about $5 billion in assets under management. The trust’s shares were trading at about a 31% discount to its net asset value on Friday, according to <a href="https://ycharts.com/companies/ETHE/discount_or_premium_to_nav">YCharts.com</a>.&nbsp;



“As we file to convert ETHE to an ETF, the natural next step in the product’s evolution, we recognize this as an important moment to bring Ethereum even further into the US regulatory perimeter,” Grayscale CEO Michael Sonnenshein said in a statement.&nbsp;



The filing follows <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf#">Grayscale’s court win against the Securities Exchange Commission</a> over its proposed conversion of its Bitcoin Trust (GBTC) to an ETF.&nbsp;



<a href="https://blockworks.co/news/judges-grayscale-sec-ruling#">Judges ruled in that case</a> that the SEC’s denial of that application — but its allowance of bitcoin futures ETFs — was “arbitrary and capricious.”



Though the decision doesn’t force the SEC to approve GBTC’s conversion to an ETF, it prevents the regulator from denying such an application on the grounds previously used.&nbsp;&nbsp;



Firms such as Ark Invest, 21Shares and VanEck <a href="https://blockworks.co/news/21shares-ark-filing-for-spot-ether-etf">filed last month to launch spot ether products</a> on the heels of that ruling.



The NYSE Arca filing also comes as various fund groups — including VanEck, ProShares and Bitwise — said Monday they were set to launch the first ETFs investing in ether futures contracts.



Read more: <a href="https://blockworks.co/news/sec-consider-ether-futures-etfs">SEC now ready to consider ETH futures ETFs, sources say — but what’s changed?&nbsp;</a>



“This filing is another important milestone as Grayscale continues to build its best-in-class ETF team, product suite, and capabilities — serving investors as a globally respected asset manager with unmatched crypto expertise,” Grayscale ETF head David LaValle said in a statement.



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Grayscale seeks to convert its Ethereum Trust to an ETF

<div id="highlights-block_61e96533078fc" class="highlights">
 <ul>
 <li>The investing and banking platform now offers crypto exposure within its Smart Portfolio offering, which currently has 400,000 accounts</li>
 <li>The allocations range from 4% to 6% of a users’ portfolio, split evenly between the Grayscale trusts</li>
 </ul>
 
</div>



Stash has begun offering its users exposure to crypto by including two trusts by Grayscale Investments within its managed investment portfolio offering.



Founded in 2015, Stash was created in response to studies showing that 44% of Americans don’t invest in stocks, 70% of households don’t have a long-term financial plan, and 68% are afraid to retire. The investing and banking platform has 6 million customers, and its assets under management total about $3 billion.&nbsp;



Stash launched its Smart Portfolio offering last March in response to users wanting a “set and forget” platform that would be managed for them, Stash Chief Investment Officer Douglas Feldman told Blockworks.&nbsp;



About 400,000 Smart Portfolio accounts have been opened over the past 10 months. Sixty percent of Stash users with a Smart Portfolio account make habitual, automated payments, according to the company.



The company will begin allocating a portion of users’ Smart Portfolio accounts to the <a href="https://grayscale.com/products/grayscale-bitcoin-trust/" target="_blank" rel="noreferrer noopener">Grayscale Bitcoin Trust</a> (GBTC) and the <a href="https://grayscale.com/products/grayscale-ethereum-trust/" target="_blank" rel="noreferrer noopener">Grayscale Ethereum Trust</a> (ETHE). GBTC and ETHE have about $27 billion and $10 billion assets under management, respectively.



Allocations to GBTC and ETHE range from 4% to 6%, split evenly between the trusts, depending on the risk profile of the portfolio, according to Elizabeth Marchietti, Stash’s director of investment strategy. She added that it was operationally easier to invest in trusts within the existing portfolio of securities versus cryptoassets directly.



“We are excited to partner with Stash, a technology-forward investment advisor, to enable more investors to access crypto through two of Grayscale’s flagship products,” a Grayscale spokeswoman said.



Stash executives told Blockworks that the company began seeking alternative options to diversify the portfolio beyond its historical exposures to the equity and bond markets. Marchietti noted that inflation and expected interest rate increases will likely negatively impact bonds’ total return.



“We just didn’t think that bonds were going to be able to as effectively hedge or demonstrate negative correlation to stocks,” she explained.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“This is as much about trying to deliver crypto exposure to our customers in a format that we really believe in…as managing the existing risk profile of this investment product.”</blockquote>



Feldman noted that while crypto, to many, is a trading asset, the company views it as an asset to invest in over time.



“Crypto is volatile; we’re all aware of that,” he said. “But we think within the confines of a long-term investment strategy with a small allocation to it and where you’re constantly putting in money on a regular basis, that is great.”



Though the company does not yet have plans to add other forms of crypto exposure, the executives said it would continue to offer education around the space.



“We do think we have a really interesting opportunity to capitalize on our customers’ attention on crypto,” Marchietti said, “and draw them into maybe more…diversified ways to play crypto through miner ETFs or other approaches to the infrastructure behind it.”



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.