Hope is not lost: Grayscale continues to apply for Ethereum ETF amid doubts

The asset manager expanded its comments on market correlations and the creation and redemption of shares.

Asset manager Grayscale Investments has proposed its intention to convert its Grayscale Ethereum Trust into a spot exchange-traded fund (ETF) by amending a regulatory filing.

In the March 15 amendment, the company strengthened its previous filing in a number of ways. The update supports the argument that regulatory sharing across the CME ETH market is sufficient to protect the spot ETH market from fraud and manipulation.

Grayscale’s latest amendment includes correlation analysis conducted by Coinbase as sufficient evidence of market correlation. Coinbase found that the CME ETH futures market “has been highly correlated” with the spot Ethereum market over the past roughly three years.

This ratio is higher than the correlation between the CME Bitcoin futures market and the spot Bitcoin market found by the US SEC.

Grayscale’s latest amendment also expands the discussion on the creation and redemption of ETF shares. It is important to note that this section only describes cash creation and redemption. Accordingly, it states that authorized participants cannot purchase, hold, deliver or receive ETH.

According to the filing, Grayscale Ethereum Trust’s current assets under management (AUM) are $11.8 billion, instead of the previous $4.8 billion. If the fund converted to an ETF, it would unlock more than $1.73 billion in value, instead of the $1.6 billion previously estimated.

Grayscale’s ETF Advocate

Grayscale Chief Legal Officer Craig Salm acknowledged the filing and highlighted the expected broad appeal of the spot Ethereum ETF. He wrote on X that investors “want and deserve access to Ethereum in the form of a spot Ethereum ETF.”

Salm added that demand for Ethereum ETFs is “as strong as spot Bitcoin ETFs.”

Market manipulation and creation/redemption methods have been major concerns ahead of the approval of a spot Bitcoin ETF in January this year. Grayscale’s latest amendment is crucial as it addresses the same issue in the context of the Ethereum ETF.

Grayscale's correction comes with an expected decline in regulatory approvals. As of March 15, Polymarket believed there was only a 26% chance of an Ethereum ETF being approved by the end of May.

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