Grayscale’s Ethereum, Bitcoin Trust spinoffs – What should holders really know?

• Grayscale is ready to launch Mini Bitcoin and Ethereum Trusts in July
• Holders will receive a 10% value of original fund shares in their Mini ETFs

The mini versions of Grayscale’s Ethereum and Bitcoin Trusts will start trading in July.

They will be spinoffs of varying percentages from the original funds, Ethereum Trust (ETHE) and Bitcoin Trust (GBTC). The Grayscale Mini Ethereum Trust (ETH) will be a 10% spinoff from ETHE and would be the cheapest U.S spot ETH ETF at a 0.15% fee. It will launch and start trading on 23 July. 

How Mini Ethereum Trust will impact holders

On how the spinoff will impact ETHE shareholders after 23rJuly, Bloomberg ETF analyst James Seyffart said that its holders would get 1 share per spinoff. 

“If you own 1,000 shares of $ETHE, you should receive 1,000 shares of mini $ETH.”

Source: X/James Seyffart

The same would apply to its Mini Bitcoin Trust (BTC). So, from a share quantity perspective, holders will get an equivalent amount of whatever they had before the spinoff. 

However, there would be a crucial difference from a valuation perspective. According to Seyffart, holders’ value on the Mini would be 10% of the original value held before the spinoff. 

“But from a value point of view — say a theoretical person has $1,000 in ETHE or GBTC. After the spinoffs occur, it should essentially be $900 in the original fund and $100 in the new mini ETFs.”

The aforementioned distributions will only be extended to users who held original ETHE or GBTC fund shares by 18 or 30 July, respectively. 

Interestingly, this deadline or record date, especially for ETHE, dropped the fund by nearly 10% to capture the distribution schedule. 

“The record date is why we saw a drop-off in $ETHE’s trading price yesterday at the start of trading. Correlating to the value of the shares of $ETH that will be distributed next week.”

Source: X/James Seyffart

Seyffart went on to add that a similar move can be expected for GBTC on 30 July. 

Will the Mini ETFs stop Grayscale outflows?

Since the launch of spot BTC ETFs, Grayscale’s GBTC has recorded over $18 billion in total outflows, despite rivals like BlackRock raking in massive inflows. 

GBTC maintains the highest fees, just like its ETHE, and this can be attributed to be one of the factors for the outflows. However, some analysts believe that the Mini ETFs could reverse this outflow trend. 

At press time, Grayscale’s ETHE had about $9.2 billion in net assets. It remains to be seen if it will hold on to the assets with the Mini Ethereum Trust (ETH) in place.