Why Now is a Great Time to Buy Ethereum

How to buy Ethereum at a 25% discount

Why Now is a Great Time to Buy Ethereum

What has more of an impact on the price of an investment? The fundamentals backing it or investor expectations?

Over the long term (multiple years), fundamentals trump all. But over the short to intermediate term (days, weeks and months), investor expectations drive much of the price action.

And right now, investor sentiment behind Ethereum is pretty bad.

Earlier this year, hopes ran high that the Securities and Exchange Commission (SEC) would be quick to approve an Ethereum (ETH) exchange-traded fund (ETF) by May 23.

In anticipation of approval, we saw the price of ETH leap higher from its January low of $2,100 to as high as $4,100 on March 11.

(ETFs are investment funds that trade on stock exchanges. They provide investors with an easy way to invest in an index, sector, commodity, or other asset.)

Since then, much has changed on the ETF front.

The SEC is rumored to be pushing to classify Ethereum as a security. Noted bitcoin investor Michael Saylor, the founder of software firm MicroStrategy, has publicly stated he views Ethereum as a security. He went on to say that the government would never approve an Ethereum ETF.

On top of that, we’ve seen a 20% sell-off in bitcoin, which invariably brings down prices across the entire crypto ecosystem.

That’s why Ethereum is currently trading at $2,900 – down almost 30% off its March highs.

So Why is Now a Great Time to Buy Ethereum?

Investor sentiment in ETH stinks right now. According to Polymarket, the world's largest prediction market, there’s just an 11% chance that the SEC approves a spot Ethereum ETF by May 23.

Four months ago, the odds were 76%.

Because investor sentiment is so negative, it means the rejection of a spot Ethereum ETF by the SEC is already priced in.

So if the worst case is already priced in… We have to ask ourselves what happens if the SEC does approve an Ethereum ETF?

Well let’s look at what happened to bitcoin when it went through similar circumstances.

After spending years under consideration by the SEC, the agency didn’t approve a spot bitcoin ETF until January 2024.

And even though the market widely anticipated the approval of a bitcoin ETF, we saw BTC spike to near $50,000 after the approval then briefly drop to $38,500. It then ran to as high as $74,000 by March 14.

From valley to peak, that was a total up move of 92%.

Now remember, the market doesn’t expect the SEC will approve an Ethereum ETF.

That tells me the reward is far higher than the risk.

That makes buying ETH at these prices a classic “asymmetric risk” trade where the potential upside is much greater than the potential downside. I would go as far as saying that asymmetric risk trade setups don't get much better than this.

Think about it…

If you buy ETH here and the SEC doesn’t approve an Ethereum ETF, you may not see any reaction in the price at all because the market is already expecting that outcome.

That’s because when something meets the market’s expectations, there’s generally no price movement. It’s only when reality fails to meet the market's expectations that you see a meaningful move in the price of an asset.

So if by some strange twist of fate an Ethereum ETF is approved, everyone will be caught flat-footed. And that means the upside could be explosive.

Ethereum could double, virtually overnight.

How To Buy Ethereum at a 25% Discount

The simplest way to buy ETH is via the big crypto firms such as Coinbase, Kraken or Gemini.

But there is another way you can own Ethereum right from your brokerage account. It’s a little riskier, and more expensive and that’s why it offers you a way to own ETH at about a 25% discount to its current market price.

I’m talking about the Grayscale Ethereum Trust, ticker symbol ETHE.

ETHE is a closed-end fund (CEF) that holds actual Ethereum. I won’t get into all the differences between a CEF and an ETF. But as a CEF, ETHE shares could trade at a discount or premium to their underlying value.

Currently, ETHE trades at a 25% discount to the Ethereum it holds.

The Grayscale Bitcoin Trust (GBTC) suffered from the same problem. At one point GBTC traded at a 50% discount to its holdings.

It wasn’t until the SEC approved the conversion of the Grayscale bitcoin trust to a bitcoin ETF that the discount went away… And GBTC started to trade at the value of its holdings.

I was once a large owner of GBTC. And while it was painful to sit through such a large discount, I was able to purchase about 30% more bitcoin by owning GBTC at a discount than if I had just bought bitcoin in the open market.

The two big negatives across my holding period were the discount got much bigger than I thought it would… And the 2% fees cost me a lot of money over my two-and-half-year holding period.

Once the ETF conversion was priced in, I swapped my GBTC holdings for the Black Rock Bitcoin Fund (IBIT) and lowered my fees from 2% to 0.25%.

You have the same risks with ETHE. The discount could get bigger. And the management fee is an outrageous 2.5%. (Full disclosure, I own shares in ETHE).

However, even if the SEC doesn’t approve an ETF on May 23, I believe an Ethereum ETF will happen either this year… Or next year at the latest.

Here’s why…

Just like Grayscale got the courts to compel the SEC to approve a bitcoin ETF, I believe it – or another Ethereum ETF sponsor such as Van Eck or BlackRock — will bring the case to the courts and they’ll likely win.

Whichever choice you make, by buying Ethereum right here, right now, either on the open market or via the ETHE, you’ll be doing the opposite of what most investors are doing… And that, my friends, is how you make the big money.

Let The Game Come to You!

Big T

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