Digital Currency Group (DCG) has announced that it plans on investing $50 million in shares of its subsidiary Grayscale’s Ethereum Classic trust (ETC). Like the company’s Bitcoin Trust, ETC is designed to offer secure exposure to Ethereum trading, minus the hassle of maintaining a wallet or storing private keys.
According to the announcement, DCG will make the proposed investment using cash at its hand while assuring compliance with regulations under the Securities Exchange Act of 1934.
So far, ETC has plummeted nearly 70% in value after its steep fall from an all-time high of $177.26 in May to the lower $50s at present. Although ETC has made 668% gains this year -- much higher than ETH’s 163% gains -- analysts believe that its rally has been fuelled by buyer frenzy rather than informed decision making on the blockchain’s potential.
Calling DCG's investment a case of arbitrage strategy, Gil Luria, an equity analyst at D.A. Davidson & Co. noted:
DCG is no stranger to buying its own assets at a discount. In March, the company CEO Barry Silbert announced that it was looking to purchase Grayscale BTC shares worth $250 million. Later on, the company boosted this investment up to $750 million. At that point, GBTC shares were trading at a considerable discount. Likewise, ETC shares are also available for a 36 percent discount at the moment.
ETC was created in 2016 after a rift splintered the second-largest blockchain community. From 2017 onwards, Ethereum Classic’s developers received Grayscale’s backing, which donated more than $1 million to the ETC Cooperative. Developers have utilized their funds to integrate Ethereum-based updates to ETC and enhance the interoperability between ETC and its powerful counterpart ETH. The cooperative will benefit from Grayscale's participation until the end of 2021.