Grayscale’s ETHE Trading Volume Dips Hard, Company’s ETH Supply Stagnates

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Grayscale offers cryptocurrency exposure through its various Trust services. Every Trust is tied to a specific crypto-asset, such as Bitcoin or Ethereum. The company’s ETHE vehicle is seeing some surprising momentum, albeit not necessarily for the right reasons. 

Grayscale’s ETHE Loses Ground

During times of intriguing cryptocurrency market momentum, market providers often see an influx in trading volume. Ethereum has recently gone through a strong price push, which should spark more demand for investment vehicles such as ETHE. In reality, however, the demand for this vehicle is dropping off rapidly in recent weeks. 

Specifically, the ETHE offering noted strong demand in early January of 2021. Not surprising, as all crypto-assets were booming at the time. Everyone wants to get in on the action when the trend is bullish. Since that date, however, the trading volume has declined from $26.69 million to $6.893 million. 

BlocDesk Grayscale ETHE Volume
Source: CryptoQuant

Several reasons may be at play in this regard. One option is how ETHE traders see this as a long-term investment, instead of something to flip for a quick profit. Another explanation is how this trading volume spike is an anomaly. After all, the volume has increased exponentially compared to a month earlier. On December 15, 2020, the volume was just $227.635. Sustaining a 100-fold increase in volume is challenging, if not nigh impossible. 

It is also worth noting ETHE is going through a substantial price decline. Despite hitting $23.4 a month ago, it trades at $15.22 in 2021. Following today’s price dip, that value may keep going lower for a while to come. Further confirmation that ETHE is not necessarily deriving value from ETH itself.

Grayscale Isn’t Buying More Ethereum

Over the past few months, there has been a lot of talk about Grayscale buying substantial amounts of Bitcoin. Given the recent block reward halving, the company is buying more BTC than miners can produce. Some even go as far as claiming this directly affects the Bitcoin price.

If Grayscale buys a lot of Ethereum, it can affect the ETHE price too. However, as this vehicle’s price is declining, one has to wonder if Grayscale is buying any Ethereum. Based on the statistics below, that doesn’t appear to be the case. In fact, the supply has remained the same since early December 2020.

BlocDesk Grayscale ETH Holdings
Source: CryptoQuant

Why that is the case is anyone’s guess. It may signal a genuine stagnation in demand for the ETHE trading vehicle. Even with the Ethereum price more than doubling in value recently, Grayscale isn’t increasing its supply, according to CryptoQuant. An intriguing development to keep an eye on. 

Source: Grayscale’s ETHE Trading Volume Dips Hard, Company’s ETH Supply Stagnates

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