Buying Grayscale Ethereum Classic shares makes sense instead of spot ETC

Yerevan (CoinChapter.com) – Ethereum’s upcoming Merge on Sep 10-20 has been the talk of the town for months. Meanwhile, it created a renewed interest in Ethereum Classic (ETC) from miners wishing to remain in the original proof-of-work system.

But what is the smartest way to go about it? A researcher says buying Grayscale ETC shares makes more sense.

Interest in Ethereum Classic grows

Mike Fay, a digital assets researcher and an author for BlochChain Reaction, commented on the matter, noting that Greyscale’s Ethereum Classic Fund is a potentially profitable investment. However, to clarify why that is, a step back is warranted.

Ethereum Merge

Ethereum has been prepping for a full proof-of-stake transition for months, if not years.

However, the flip side of the transition is obsolete miners who don’t have the proper equipment to enable BTC mining. Thus, they could target Ethereum Classic, which forked from Ethereum in 2015, based on the determination to stay proof-of-work.

ETH mining is still done with GPUs rather than with the ASIC machines required by most other PoW networks. Ethereum miners can’t simply switch to securing Bitcoin because their machines aren’t capable of profitably mining it.

says Fay.

Moreover, the Network’s hashrate reached an all-time high thanks to the migrating miners. But Ethereum Classic still has very little economic activity on the Network, making ETC purchase a gamble. Moreover, the investment is high-risk, which could discourage investors from putting their trust in spot ETC shares. Thus, the option to buy ETCG might interest many.

Also read: Ethereum Classic (ETC) pumps 45% in three days on Merge FOMO — will the rally continue?

Grayscale Ethereum Classic Fund (ETCG) is the way to go

Fay examined Grayscale’s cryptocurrency trusts that trade at varying discounts or ‘premiums’ to the net asset value of the trust shares. ETCG is a clear outlier in its discount rate compared to the other funds in the top 5 by holdings and is 60% undervalued.

While many often point to Grayscale’s management fee as the justification for the fund share discounts, the take rate from ETCG is 2.5%. That’s identical to every other Grayscale single asset fund with the exception of GBTC which is 2.0%.

Fay pointed out.

However, the most apparent difference between ETCG and the other Grayscale funds is the lion’s share of the circulating supply that Grayscale is managing. Furthermore, there’s a correlation between the circulating supply portion controlled by Grayscale and the discount rate.

Is ETC a risky investment?

Ethereum Classic token’s technicals forecast a possible price boost, in addition to the 134% jump quarter-to-date. The ETC/USD exchange rate stood at $33 on Aug 31, while the digital asset painted a bullish formation dubbed the ‘falling wedge.’

The latter entails two converging trendlines with a negative slope that takes the asset value slightly lower before another bullish kick. Moreover, the target uptrend would equal the maximal distance between the trendlines, pinning the ETC price at approximately $43, or 30% higher than the current value.

Meanwhile, it is important to note that Ethereum Classic remains a risky investment, considering its low economic activity, and the overall bearish vector on the market. When it comes to Grayscale, Fay noted that it could be even riskier than buying spot ETC but more rewarding.

Since Grayscale trust shares are a derivative of the underlying assets that they represent, there is an added element of risk associated with holding the shares.

noted the researcher.