Grayscale Ethereum Mini Trust ETF Reports $32.8 Million Loss on Ether Investments

Grayscale Ethereum Mini Trust ETF (formerly Grayscale Ethereum Mini Trust (ETH)) reported a net realized and unrealized loss on its Ether investments of $32.8 million for the period from its operational commencement on July 23, 2024, to December 31, 2024. This loss comprised a realized loss of $15.3 million from Ether transfers to meet redemptions and a net unrealized depreciation of $17.5 million. The loss stemmed from a decrease in Ether's price from $3,458.99 per Ether on July 23, 2024, to $3,340.40 per Ether by December 31, 2024. The Trust's net assets increased to $1,572.9 million during this period, primarily due to Ether contributions from the Initial Distribution ($1,010.9 million) and Share creations ($706.9 million), partially offset by the price depreciation and redemptions.

Significant changes occurred in the Trust's sponsorship structure. Until December 31, 2024, Grayscale Investments, LLC was the sole sponsor. Following a reorganization on January 1, 2025, Grayscale Investments Sponsors, LLC (GSIS) and Grayscale Operating, LLC (GSO) became co-sponsors. However, GSO voluntarily withdrew on January 3, 2025, leaving GSIS as the sole sponsor effective May 3, 2025. The Trust also underwent a name change from Grayscale Ethereum Mini Trust (ETH) to Grayscale Ethereum Mini Trust ETF on November 4, 2024, and its shares began trading on NYSE Arca on July 23, 2024, under the ticker symbol "ETH." A 1-for-10 reverse share split was completed on November 19, 2024.

Operational developments included the issuance of 22,995,000 shares (retroactively adjusted for the share split) through creations and an additional 31,015,850 shares (retroactively adjusted) from the Initial Distribution. Redemptions totaled 4,040,062 shares (retroactively adjusted) during the period. As of December 31, 2024, the Trust held approximately 470,876 Ether. The Trust's net asset value (NAV) per share, calculated using the CoinDesk Ether Price Index, varied from its Principal Market NAV per share, calculated using the price from the Trust's principal market (Coinbase prior to December 31, 2024, and Crypto.com thereafter). The shares traded at an average premium of 0.2% and an average discount of 0.1% relative to the NAV per share during the period.

The Trust's activities are limited to issuing and redeeming shares in Baskets of 10,000 shares, transferring Ether to cover expenses, and distributing assets upon termination. Currently, creations and redemptions are conducted through cash orders facilitated by a liquidity provider, although the Trust anticipates future in-kind transactions subject to regulatory approval. The Trust does not engage in staking, though it may explore this in the future contingent upon regulatory changes and amendments to its Trust Agreement. The Sponsor's fee, initially waived for the first six months on assets under $2 billion, became 0.15% thereafter. The Trust incurred $183,828 in Sponsor's fees from January 23, 2025 to February 24, 2025.

The filing includes extensive discussion of risk factors, including market volatility, regulatory uncertainty surrounding digital assets, reliance on third-party service providers, and potential conflicts of interest. The Trust's future outlook is contingent upon various factors, including the continued development and adoption of the Ethereum network, regulatory developments in the United States and globally, and the stability of the digital asset markets. The filing also details the Trust's tax treatment, assuming it qualifies as a grantor trust for U.S. federal income tax purposes. The Trust was involved in legal proceedings related to advertising and promotion of an affiliate trust, Grayscale Bitcoin Trust, but these are not expected to materially affect the Trust's operations.