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Grayscale Seeks to Transform Ethereum Trust into ETF, Citing Strong Investor Demand

Grayscale's amendment: bolstering the Ethereum ETF conversion case

Grayscale has recently taken significant steps toward converting its Ethereum Trust into a spot exchange-traded fund (ETF) by amending a crucial regulatory filing on March 15. This amendment is vital, fortifying Grayscale's original filing with comprehensive arguments supporting the conversion. Specifically, it highlights the robustness of surveillance sharing within the CME ETH market as a reliable mechanism against fraud and manipulation in the spot Ethereum market. 

Leveraging a correlation analysis by Coinbase, Grayscale presents compelling evidence of a consistent and high correlation between the CME ETH futures market and the spot Ethereum market over the past three years. This correlation surpasses what the SEC observed between the CME Bitcoin futures market and the spot Bitcoin market, strengthening the case for an Ethereum ETF. 

The amendment elaborates on the share creation and redemption processes, notably emphasizing cash creations and redemptions, thereby clarifying that authorized participants are restricted from directly dealing with ETH. 

Investor demand and market analysis: the core of Grayscale's amendment

Craig Salm, Grayscale’s Chief Legal Officer, explicitly acknowledges the market's demand, stating on X: 

"Investors want and deserve access to Ethereum in the form of a spot Ethereum ETF." 

This statement not only highlights the investors' appetite for such financial products but also mirrors the broader belief in the crypto community that the case for an Ethereum ETF is as robust as it was for spot Bitcoin ETFs. Salm's remarks are bolstered by Grayscale's analysis, which anticipates unlocking over $1.73 billion of value through the conversion of the fund to an ETF, a significant uptick from the $1.6 billion previously estimated. 

This amendment arrives at a crucial juncture, especially as market expectations for regulatory approval wane, with Polymarket odds indicating a mere 26% chance of approval by the end of May as of March 15.