by Robert DeVoe
Grayscale Investments, a cryptocurrency investment firm that belongs to the Digital Currency Group has just released a statement indicating their intent to file for the creation of new shares for their Ethereum Classic Investment Trust. Grayscale Investments currently manages $1.2 billion in assets.
The company has done this sort of listing before with it’s Bitcoin Investment Trust. Both the bitcoin trust and the Ethereum Classic trust are or will be listed on the OTCQX exchange. The sponsor of the new listing, Orrick Herrington & Sutcliffe LLP has stated that they expect the process to be finished by mid-2018.
What’s the Purpose of the Trust?
For those of us who are more familiar with directly buying and holding digital currencies, it may be at first difficult to understand what the purpose of such an investment trust. The idea behind the trust is that it allows traditional, stock market investors access to cryptocurrencies, without needing to concern themselves with the technical issues surrounding, buying, holding, and selling them.
Additionally, by purchasing shares in the trust, tax compliance issues are simplified by making ownership no different than that of any other stock or bond.
According to official sources, one share of the ETC trust will represent just under one unit of ETC, about 0.9844 ETC per share. Comparing this to the company’s current Bitcoin Investment Trust (OTCQX: GBTC), where shares are currently trading at just over $850 each, individual units of the ETC trust will represent more units of ETC per share. Shares in the Bitcoin Investment Trust represent 0.09 units of BTC per share.
The ETC trust also levies a three percent annual fee, which includes a one percent “development contribution” fee, and the Bitcoin trust has a two percent annual fee. In total there are 3,576,600 ETC trust shares outstanding, which at today’s ETC valuation, would lead to an overall fund value of approximately $56 million.
Grayscale and Ethereum Classic
Grayscale has been a long-standing proponent of the Ethereum Classic technology. This announcement is also likely intended to coincide with the ETC summit that began on November 13. Grayscale Investments is attending the conference and is also presenting there.
As reported earlier by BTCManager, the summit is also being attended by Bitmain co-founder Jihan Wu.
In the last several days, unit prices for ETC have increased dramatically. While still not approaching previous all-time highs, the currency hit a high this week of $20 per unit, and currently sits at just over $15 each. This is noticeably higher than its recent average of about $10 each.
Long-term Effects on Ethereum Classic
While it’s difficult to assess exactly how this will affect ETC prices, it’s safe to say that the trust will give more investors access to the asset. Larger numbers of traditional investors have been seeking exposure to cryptocurrencies, and the trust will put Ethereum Classic firmly in the forefront of this growing trend.
Grayscale Investments stated target price for ETC, assuming it reaches a certain level of adoption after five years time, is approximately $150 each. This is according to their investment thesis they published in mid-2017. If such a level were to be reached, it would represent a ten-fold growth in the Ethereum Classic market cap and valuation.