In the letter
- Grayscale is reducing the Grayscale Ethereum Trust’s stock into nine pieces.
- This will make the individual shares of the trust cheaper.
- It will not affect the total value of the fund.
Grayscale Investments announced today that it is dividing the shares of its Grayscale Ethereum Trust, likely to make it more affordable for retail investors discounted by the boom in the cryptocurrency market.
On December 14, Grayscale will split the shares of the Trust, which holds $ 1.6 billion of assets under management, by 9 to 1. Anyone who currently owns shares in Grayscale will receive 8 extra shares.
This will cause the price of each share to drop but makes no difference to the overall value of the fund.
The Grayscale Ethereum Trust is the closest thing to a Bitcoin Exchange-Traded Fund. The publicly traded fund represents the shares of a money pool of private investors, which Grayscale used to buy Ethereum, the second largest cryptocurrency by market capitalization.
But the Grayscale Ethereum Trust’s share price, which vaguely represents a fraction of Ethereum’s price (plus a hefty premium, Grayscale’s management fee result), has increased this year, from $ 60 per share to its current price , $ 109.
There appear to be two reasons for the increase:
First, the price of Ethereum jumped from around $ 340 in early October to highs of $ 635, according to data from CoinMarketCap. Secondly, Grayscale bought a whole lot of Ethereum this year, which means there is more ETH per share.
Thus, if the price of ETH continues to rise, smaller fish (known as retail investors) may not be able to afford an investment in the fund.
The grayscale has already divided the stocks. In January 2018, as Bitcoin was in its downward slump (who knew then?). The grayscale divided his shares by 91 to 1, meaning investors would receive 90 more shares. Hence, the Grayscale fund was worth $ 3.19 billion. It now has a market capitalization of $ 12.8 billion.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.