Ethereum has been participating in a parabolic bull run in recent weeks, gaining 49.7% in the past 7 days alone. According to an analyst, this surge could be the result of institutional investors in the Grayscale Ethereum Trust (ETHE), which engulf Ethereum in the market at a high rate. These investors created deals six months ago. They are scrambling to cover the Ethereum they used to do.
The bull case for Ethereum
Joshua Frank made the revelation in a recent Twitter thread. According to the analyst, investors in the Trust are looking to close a deal they have built to take advantage of the premium value of the shares in the Trust. To do this, investors need Ethereum and have accumulated as much as possible in recent days. This could continue for a while, pushing the price of Ethereum even higher.
To invest in the Grayscale Ethereum Trust, institutional investors borrow Ethereum at an annual interest rate of 8%, Frank revealed. They use Ethereum to buy ETHE shares at the value of the cryptocurrency of the day. However, there is a delay before they can receive their ETHE shares. Initially, this period was 12 months, but has since been reduced to only six.
ETHE shares trade at a higher value than the underlying asset, Ethereum. This bonus can sometimes go up to 100%, Frank revealed. This is what investors capitalize on, selling their shares to take advantage of the premium.
Once investors have sold their ETHE shares and captured the profits, they must repay their Ethereum loan. This leads them to cryptocurrency exchanges where they buy Ethereum at the price of the day. These loans are each worth hundreds of millions. Investors have to buy massive amounts of Ethereum. This is what has pushed the value of cryptocurrency to sky-high heights, Frank believes.
2021 could be the best year for Ethereum yet
While Grayscale’s influence on the price of Ethereum is significant, it is not the only determining factor. Cryptocurrency has continued to gain favor with investors, both retail and institutional. For institutional traders, Ethereum is emerging as an alternative to Bitcoin, at a time when the price of Bitcoin is reaching new highs.
Hong Kong-based Jehan Wu believes Ethereum’s lower price is particularly lucrative for Wall Street investors.
Decentralized finance is set to become even more important in 2021. Ethereum could reach even higher heights. Popular analyst Nicholas Merten recently featured Ethereum as the best project to watch in 2021. As Crypto News Flash reported, the analyst predicts the cryptocurrency will hit $ 10,000 by 2022.
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