The Ethereum Classic Investment Trust (ETCG) Explained

The Ethereum Classic Investment Trust (ETCG) is an investment product by Grayscale which gives investors and traders exposure to Ethereum Classic (ETC).

ETCG is the only way to get exposure to cryptocurrency on the traditional markets aside from trading Bitcoin futures or buying Grayscale’s other product GBTC (at least until BAKKT launches).

Every share of ETCG represents a little under 1 ETC. Specifically the trust has 4,864,000 shares of 0.96257972 ETC (so a little under 4.5 million of the current circulating supply of 104,003,310 ETC, i.e. about 4% of all circulating ETC, is held in the ETCG trust). NOTE: the exact holdings of the trust are subject to change over time, check the official website for current holdings.

With that noted, ETCG often trades at a substantial premium to ETC. For example, on 08/22/2018 ETCG traded at $17.47 and ETC traded at $12.40. This difference between the market price and “NAV (native asset value)” is called a “premium.”

Like GBTC (the Bitcoin Trust) ETCG (the Ethereum Classic Trust) historically trades at a rather high premium. See the premium here by clicking “market performance.” If you catch these things at the wrong time, you can end up with a really high price compared to the value of the underlying asset (TIP: if the market price is higher than the value of the asset has ever been, take it as a red flag; see some tips on GBTC as an indicator to understand what I mean).

One last thing to consider is that there is an annual fee of 2% plus a 1% development contribution (3% total).

Put that all together and you are buying 1 ETC for more than it is worth and the value of your investment is generally decreasing by 3% a year (not to mention that crypto is risky in general).

So, you are taking on risk with crypto AND taking on extra risk with ETCG. That is the bad news.

Here is the good news though, GBTC has traded at a premium for a long time now, when the market is bullish that premium tends to inflate. That means if you catch these trusts low and have a little luck, you can actually outpace the gains made by crypto holders in crypto markets.

So there are pros and cons. The benefits are exposure to crypto via the traditional stock market (so you can use your 401k to buy this asset for example) and the potential for massive gains, while the drawbacks are the risks that come along with crypto, fees, and premiums.

In short, if you know what you are getting into, ETCG could be the score of a lifetime, however there are serious risks to consider here.

What is a trust? A trust (an investment trust) is a company that owns a fixed amount of a given asset (like gold or bitcoin). Investors pool money and buy shares of the trust, owning contracts that represent ownership of the asset held by the trust. In a gold trust, 1 share might be worth 1/10th an ounce of gold. With the Ethereum Classic trust, 1 share is worth about 1 ETC. The trust is managed by a company who charges a fee, in the case of GBTC that company is Grayscale.