What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2020-11-06 · 44 added, 58 removed, 90 unchanged (53% of the section changed)

3 unchanged sentences

Our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to these differences include, but are not limited to, those set forth under Part II, Item 1A.

Risk Factors and under “Risk Factors” and the other sections of the Information Statement.

Factors that could cause or contribute to these differences include, but are not limited to, those set forth under Part I, Item 1A.

Risk Factors in this Quarterly Report or in Part II, Item 1A.

Risk Factors or other sections of our Annual Report on Form 10-K for the year ended December 31, 2020.

Trust Overview

2 unchanged sentences

As a passive investment vehicle, the investment objective of the Trust is for the Shares (based on ETH per Share) to reflect the value of the ETH held by the Trust, determined by reference to the Index Price, less the Trust’s expenses and other liabilities.

To date, the Trust has not met its investment objective and the Shares quoted on OTCQX have not reflected the value of ETH held by the Trust, less the Trust’s expenses and other liabilities, but have instead traded at a substantial premium over such value.

To date, the Trust has not met its investment objective and the Shares quoted on OTCQX have not reflected the value of ETH held by the Trust, less the Trust’s expenses and other liabilities, but instead have traded at both premiums and discounts to such value, with variations that have at times been substantial.

The Trust is not managed like a business corporation or an active investment vehicle.

22 unchanged sentences

Based on information reasonably available to the Trust, Exchange Markets have the greatest volume and level of activity for the asset.

The Trust therefore looks to accessible Exchange Markets as opposed to the Brokered Market, Dealer Market and Principal-to-Principal Markets

to determine its principal market.

The Trust therefore looks to accessible Exchange Markets as opposed to the Brokered Market, Dealer Market and Principal-to-Principal Markets to

determine its principal market.

As a result of the aforementioned analysis, an Exchange Market has been selected as the Trust’s principal market.

9 unchanged sentences

Review of Financial Results (unaudited)

Financial Highlights for the Three and Nine Months Ended September 30, 2020 and 2019

Financial Highlights for the Three Months Ended March 31, 2021 and 2020

(All amounts in the following table and the subsequent paragraphs, except per Share, ETH and price of ETH amounts, are in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Net realized and unrealized gain (loss) on investment in Ethereum

Net increase (decrease) in net assets resulting from operations

Net realized and unrealized gain on investment in ETH for the three months ended September 30, 2020 was $221,304 which includes a realized gain of $1,389 on the transfer of ETH to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in ETH of $219,915.

Net realized and unrealized gain on investment in ETH for the period was driven by ETH price appreciation from $224.96 per ETH as of June 30, 2020 to $355.34 per ETH as of September 30, 2020.

Net increase in net assets resulting from operations was $216,965 for the three months ended September 30, 2020, which consisted of the net realized and unrealized gain on investment in ETH, less the Sponsor’s Fee of $4,339.

Net assets increased to $803,954 at September 30, 2020, a 110% increase for the three-month period.

The increase in net assets resulted from the aforementioned ETH price appreciation and the contribution of approximately 573,201 ETH with a value of $204,149 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 12,524 ETH to pay the foregoing Sponsor’s Fee.

Net realized and unrealized loss on investment in ETH for the three months ended September 30, 2019 was ($23,287) which includes a realized loss of ($374) on the transfer of ETH to pay the Sponsor’s Fee, net change in unrealized depreciation on the Sponsor’s Fee payable of $25, and net change in unrealized depreciation on investment in ETH of ($22,938).

Net realized and unrealized loss on investment in ETH for the period was driven by ETH price depreciation from $301.42 per ETH as of June 30, 2019 to $178.13 per ETH as of September 30, 2019.

Net decrease in net assets resulting from operations was ($23,622) for the three months ended September 30, 2019, which consisted of the net realized and unrealized loss on investment in ETH, plus the Sponsor’s Fee of $335.

Net assets increased to $68,505 at September 30, 2019, a 130% increase for the period.

The increase in net assets resulted from the contribution of approximately 287,411 ETH with a value of $62,335 to the Trust in connection with Share creations during the period, partially offset by the aforementioned ETH price depreciation and the withdrawal of approximately 2,005 to pay the foregoing Sponsor’s Fee.

Net realized and unrealized gain on investment in ETH for the nine months ended September 30, 2020 was $299,773, which includes a realized gain of $1,046 on the transfer of ETH to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in ETH of $298,727.

Net realized and unrealized gain on investment in ETH for the period was driven by ETH price appreciation from $127.86 per ETH as of December 31, 2019 to $355.34 per ETH as of September 30, 2020.

Net increase in net assets

resulting from operations was $292,902 for the nine months ended September 30, 2020 , which consisted of the net realized and unrealized gain on investment in ETH , less the Sponsor’s Fee of $6,871 .

Net assets increase d to $803,954 at September 30, 2020 , a 1 , 165% increase for the period.

Net realized and unrealized gain on investment in ETH for the three months ended March 31, 2021 was $3,436,598 which includes a realized gain of $22,223 on the transfer of ETH to pay the Sponsor’s Fee and net change in unrealized appreciation on investment in ETH of $3,414,375.

Net realized and unrealized gain on investment in ETH for the period was driven by ETH price appreciation from $744.99 per ETH as of December 31, 2020 to $1,899.98 per ETH as of March 31, 2021.

Net increase in net assets resulting from operations was $3,407,328 for the three months ended March 31, 2021, which consisted of the net realized and unrealized gain on investment in ETH, less the Sponsor’s Fee of $29,270.

Net assets increased to $6,030,070 at March 31, 2021, a 176% increase for the period.

The increase in net assets resulted from the aforementioned ETH price appreciation and the contribution of approximately 255,556 ETH with a value of $434,615 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 18,924 ETH to pay the foregoing Sponsor’s Fee.

Net realized and unrealized loss on investment in ETH for the nine months ended September 30, 2019 was ($14,826), which includes a realized loss of ($700) on the transfer of ETH to pay the Sponsor’s Fee, net change in unrealized appreciation on the Sponsor’s Fee payable of ($9), and net change in unrealized depreciation on investment in ETH of ($14,117).

Net realized and unrealized loss on investment in ETH for the period was driven by pricing trends in ETH during the period in which the contribution of ETH to the Trust in connection with Share creations occurred when the price per ETH was higher during the nine months ended September 30, 2019 than the price of ETH at September 30, 2019.

Net decrease in net assets resulting from operations was ($15,274) for the nine months ended September 30, 2019, which consisted of the net realized and unrealized loss on investment in ETH, plus the Sponsor’s Fee of $448.

Net assets increased to $68,505 at September 30, 2019, a 1,005% increase for the period.

The increase in net assets resulted from ETH price appreciation from $130.90 per ETH as of December 31, 2018 to $178.13 per ETH as of September 30, 2019 and the contribution of approximately 339,514 ETH with a value of $77,579 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 2,587 ETH to pay the foregoing Sponsor's Fee.

Net realized and unrealized loss on investment in ETH for the three months ended March 31, 2020 was ($28,852) which includes a realized loss of ($273) on the transfer of ETH to pay the Sponsor’s Fee and net change in unrealized depreciation on investment in ETH of ($28,579).

Net realized and unrealized loss on investment in ETH for the period was driven by pricing trends in ETH during the period in which the contribution of ETH to the Trust in connection with Share creations occurred when the price per ETH was higher during the three months ended March 31, 2020 than the price of ETH at March 31, 2020.

Net decrease in net assets resulting from operations was ($29,630) for the three months ended March 31, 2020, which consisted of the net realized and unrealized loss on investment in ETH, plus the Sponsor’s Fee of $778.

Net assets increased to $142,141 at March 31, 2020, a 124% increase for the period.

The increase in net assets resulted from ETH price appreciation from $127.86 per ETH as of December 31, 2019 to $133.58 per ETH as of March 31, 2020 and the and the contribution of approximately 571,421 ETH with a value of $108,231 to the Trust in connection with Share creations during the period, partially offset by the withdrawal of approximately 4,282 to pay the foregoing Sponsor’s Fee.

Off-Balance Sheet Arrangements

8 unchanged sentences

Selected Operating Data

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Opening balance

6 unchanged sentences

Closing balance

As of September 30,

As of March 31,

Price of ETH on principal market (2)

1 unchanged sentence

Digital Asset Holdings per Share (4)

The Trust performed an assessment of the principal market at September 30, 2020 and 2019 , and identified the principal market as Coinbase Pro.

As of September 30, 2020 and 2019 the NAV per Share was calculated using the fair value of ETH based on the price provided by Coinbase Pro, the Digital Asset Exchange that the Trust currently considers its principal market, as of 4:00 p.m., New York time, on the valuation date.

Share and per Share amounts for periods presented prior to the Share Split have been retroactively adjusted for the 9-for-1 Share Split of the Trust’s issued and outstanding Shares completed on December 17, 2020.

The Trust performed an assessment of the principal market at March 31, 2021 and 2020, and identified the principal market as Coinbase Pro.

As of March 31, 2021 and 2020 the NAV per Share was calculated using the fair value of ETH based on the price provided by Coinbase Pro, the Digital Asset Exchange that the Trust currently considers its principal market, as of 4:00 p.m., New York time, on the valuation date.

The Trust’s Digital Asset Holdings per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., New York time, on the valuation date.

The Trust’s Digital Asset Holdings per Share is calculated using a non-GAAP methodology where the volume-weighted average price is derived from multiple Digital Asset Exchanges.

See “Key Operating Metrics” in the Information Statement for a description of the Trust’s Digital Asset Holdings per Share.

The Digital Asset Exchanges used to calculate the Index Price as of September 30, 2020 were Coinbase Pro, LMAX Digital, Kraken and Bitstamp.

As of September 30, 2019, the Digital Asset Exchanges used to calculate the Index Price consisted of Coinbase Pro, Kraken, Bitstamp, and itBit.

See “Key Operating Metrics” in the Trust’s Annual Report on Form 10-K for a description of the Trust’s Digital Asset Holdings per Share.

The Digital Asset Exchanges used to calculate the Index Price as of March 31, 2021 and 2020, were Coinbase Pro, Bitstamp, Kraken and LMAX Digital.

For accounting purposes, the Trust reflects creations and the ETH receivable with respect to such creations on the date of receipt of a notification of a creation but does not issue Shares until the requisite number of ETH is received.

2 unchanged sentences

The Trust currently has no intention of seeking regulatory approval to operate an ongoing redemption program.

As of September 30, 2020, the Trust had a net closing balance with a value of $806,193,731, based on the Index Price (non-GAAP methodology).

As of September 30, 2020, the Trust had a total market value of $803,953,864, based on the principal market (Coinbase Pro).

As of September 30, 2019, the Trust had a net closing balance with a total value of $66,501,546, based on the Index Price (non-GAAP methodology).

As of September 30, 2019, the Trust had a total market value of $68,505,208, based on the principal market (Coinbase Pro).

As of March 31, 2021, the Trust had a net closing balance with a value of $5,852,942,374, based on the Index Price (non-GAAP methodology).

As of March 31, 2021, the Trust had a total market value of $6,030,069,599, based on the principal market (Coinbase Pro).

As of March 31, 2020 , the Trust had a net closing balance with a total value of $141,492,283 , based on the Index Price (non-GAAP methodology).

As of March 31, 2020 , the Trust had a total market value of $142,141,379 , based on the principal market (Coinbase Pro).

Historical Digital Asset Holdings and ETH Prices

2 unchanged sentences

Movements may be influenced by various factors, including, but not limited to, government regulation, security breaches experienced by service providers, as well as political and economic uncertainties around the world.

The following chart illustrates the movement in the Trust’s Digital Asset Holdings per Share versus the Index Price and the Trust’s NAV per Share from December 14, 2017 to September 30, 2020.

The following table illustrates the movements in the Index Price from the beginning of the Trust’s operations on December 14, 2017 to September 30, 2020 .

Since the beginning of the Trust’s operations, the Index Price has ranged from $84.31 to $1,314.70 , with the straight average being $312.80 through September 30, 2020 .

The following chart illustrates the movement in the Trust’s Digital Asset Holdings per Share (as adjusted for the Share Split for periods prior to December 17, 2020) versus the Index Price and the Trust’s NAV per Share (as adjusted for the Share Split for periods prior to December 17, 2020) from December 14, 2017 to March 31, 2021.

The following table illustrates the movements in the Index Price from the beginning of the Trust’s operations on December 14, 2017 to March 31, 2021.

Since the beginning of the Trust’s operations, the Index Price has ranged from $84.31 to $1,992.26, with the straight average being $417.29 through March 31, 2021.

The Sponsor has not observed a material difference between the Index Price and average prices from the constituent Digital Asset Exchanges individually or as a group.

1 unchanged sentence

Last business day

December 14, 2017 (the first Creation Basket of the Trust) to September 30, 2018

Twelve months ended September 30, 2019

Twelve months ended September 30, 2020

December 14, 2017 (the first Creation Basket of the Trust) to September 30, 2020

The following table illustrates the movements in the price of ETH, as reported on the Trust’s principal market, from the beginning of the Trust’s operations on December 14, 2017 to September 30, 2020.

December 14, 2017 (the first Creation Basket of the Trust) to March 31, 2018

Twelve months ended March 31, 2019

Twelve months ended March 31, 2020

Twelve months ended March 31, 2021

December 14, 2017 (the first Creation Basket of the Trust) to March 31, 2021

Since the beginning of the Trust’s operations, the price of ETH has ranged from $82.34 to $1,987.10, with the straight average being $419.56.

1 unchanged sentence

Last business day

December 14, 2017 (the first Creation Basket of the Trust) to September 30, 2018

Twelve months ended September 30, 2019

Twelve months ended September 30, 2020

December 14, 2017 (the first Creation Basket of the Trust) to September 30, 2020

December 14, 2017 (the first Creation Basket of the Trust) to March 31, 2018

Twelve months ended March 31, 2019

Twelve months ended March 31, 2020

Twelve months ended March 31, 2021

December 14, 2017 (the first Creation Basket of the Trust) to March 31, 2021

The following chart sets out the historical closing prices for the Shares as reported by OTCQX and the Trust’s Digital Asset Holdings per Share.

ETHE Premium:

ETHE Premium/(Discount):

ETHE Share Price vs.

1 unchanged sentence

The following chart sets out the historical premium and discount for the Shares as reported by OTCQX and the Trust’s Digital Asset Holdings per Share.

ETHE Premium:

ETHE Premium/(Discount) %:

ETHE Share Price vs.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis