I made a post in last October talking about the widening discount to NAV of Grayscale GBTC and ETHE trust, and why I think it's a results of overreact from the more traditional investors (investors that doesn't know how to safekeep seed phrases, and get exposure to crypto via traditional broker account.)

Since the post I've made a few more deposits into my brokerage account and try to build a larger position on this bet. So I decided to give an update on my bet, and what do I plan to do next and why.

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The average discount to NAV rate is -35.83% for my entire position

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The average price of my share is $8.37

Now from my calculation it seems like if I would just buy ETH instead of ETHE I would be up 25.57% in terms of FIAT value, but buying ETHE I'm only up 1.94%, which if compare to buy and hold ETH it's a negative return of -18.56%.

This is obvious as my position were bought at around -35.83% discount to NAV on ETHE, and right now the discount to NAV is -46.94%, but luckily this entire position was still relatively small compared to my ETH staked in validators.

What I plan to do next

So I'm actually excited that Shanghai update is around the corner, and my plan now is literally convert another 20~30% of my withdrawn staked ETH and buy ETHE with it, hopefully during that time the discount is still at current level or lower, so I can average down my position to get discount at around 45~50% to NAV.

I get that people would have a tendency to downvote this as most people in this sub are strongly against any crypto derivatives and think most centralized entities are sketchy in one way or another, and I'm totally agree with that, there's a non zero probabilities Grayscale could be fraud, but to me that is highly unlikely.

A few reason why I would still buy:

• I believe the current discount is overblown and overreact from more traditional investors that have only surface idea on crypto so they are more prone to fear and sold their ETHE even at a huge discount, but I believe there's a multiple way we would see a reversal on the discount.
• I believe as soon as if there's any positive conversation in the court case of Grayscale v SEC we should start seeing the discount gap to close, or market upturn and traditional investor want back in, or even force liquidation from majority of shareholder votes. (redeemgbtc.com are gathering shareholder and I heard they already have ~30% of GBTC owners)
• I don't think Grayscale and it's custody Coinbase will lie hand in hands and playing with customer funds, and continually in their quarterly filings, there's just too many parties including people in gov bodies needed to coordinate together to pull this kind of fraud, and many of these people are already well off which mean even less incentive for them to do this. These are all SEC reporting company with audits from randomly chosen 3rd party auditors, they are not SBF level company.
• The discount are just too attractive, at the current discount of ~46%, it's basically as if you're buying ETH at $950~1050, even with the 2% management fees you have a long time for this to play out.
• I have too much in staked ETH in validators, and if anything happen to me my family doesn't have the knowledge to know how to get them out from my validators, how to not get scam, how to secure seed phrases, and I have no secure way to give them my seed phrase (no i dont want to give it to them right now, because they are someone that save their password in contact book, or take a photo of their written password and sync it to cloud.) This is one major reason I chose to convert some crypto exposure into a proxy like trust that I have emergency setup with my broker.

Can I lose everything on this bet

As I said there is always a possibilities, but I personally think it's highly unlikely, and I also did not just put everything into it as well, so the risk and the reward match my tolerance.

It also seems like some people in this sub is also playing this bet right now, for example this guy put 600k into ethe, and cathie wood has been buying GBTC continuously, which I assume is to lower their average discount to NAV of their position too.

What do you think about this bet?

(Again, everyone here can disagree or agree with my bet, as the risk tolerance is always differ for everyone)