What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-06 · 43 added, 42 removed, 266 unchanged (24% of the section changed)

2 unchanged sentences

STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

( Amounts in thousands, except Share amounts)

June 30, 2021

( Amounts in thousands, except Share and per Share amounts)

September 30, 2021

December 31, 2020

Investment in Ethereum, at fair value (cost $ 1,325,162 and $ 905,880 as of June 30, 2021 and December 31, 2020, respectively)

Investment in Ethereum, at fair value (cost $ 1,316,838 and $ 905,880 as of September 30, 2021 and December 31, 2020, respectively)

Sponsor's Fee payable, related party

11 unchanged sentences

( Amounts in thousands, except quantity of Ethereum and percentages)

June 30, 2021

September 30, 2021

Investment in Ethereum

7 unchanged sentences

( Amounts in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Investment income:

3 unchanged sentences

Net realized and unrealized gain from:

Net realized gain (loss) on investment in Ethereum

Net realized gain on investment in Ethereum

Net change in unrealized appreciation on investment in Ethereum

5 unchanged sentences

( Amounts in thousands, except change in Shares outstanding)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Increase in net assets from operations:

Net investment loss

Net realized gain (loss) on investment in Ethereum

Net realized gain on investment in Ethereum

Net change in unrealized appreciation on investment in Ethereum

27 unchanged sentences

As partial consideration for the Sponsor’s services, the Trust pays Grayscale a Sponsor’s Fee as discussed in Note 6.

The Sponsor also acts as the sponsor and manager of other investment products including Grayscale Bitcoin Trust (BTC) (OTCQX:

GBTC), Grayscale Basic Attention Token Trust (BAT), Grayscale Bitcoin Cash Trust (BCH) (OTCQX:

The Sponsor also acts as the sponsor and manager of other investment products including Grayscale Basic Attention Token Trust (BAT), Grayscale Bitcoin Trust (BTC) (OTCQX:

GBTC), Grayscale Bitcoin Cash Trust (BCH) (OTCQX:

BCHG), Grayscale Chainlink Trust (LINK), Grayscale Decentraland Trust (MANA), Grayscale Ethereum Classic Trust (ETC) (OTCQX:

ETCG), Grayscale Filecoin Trust (FIL), Grayscale Horizen Trust (ZEN), Grayscale Litecoin Trust (LTC) (OTCQX:

LTCN), Grayscale Livepeer Trust (LPT), Grayscale Stellar Lumens Trust (XLM), Grayscale Zcash Trust (ZEC), Grayscale Decentralized Finance Fund LLC (DeFi), and Grayscale Digital Large Cap Fund LLC (OTCQX:

ETCG), Grayscale Filecoin Trust (FIL), Grayscale Horizen Trust (ZEN) (OTCQX:

HZEN), Grayscale Litecoin Trust (LTC) (OTCQX:

LTCN), Grayscale Livepeer Trust (LPT), Grayscale Stellar Lumens Trust (XLM) (OTCQX:

GXLM), Grayscale Zcash Trust (ZEC) (OTCQX:

ZCSH), Grayscale Decentralized Finance Fund LLC (DeFi), and Grayscale Digital Large Cap Fund LLC (OTCQX:

GDLC), each of which is an affiliate of the Trust.

The following investment products sponsored or managed by the Sponsor are also SEC reporting companies with their shares registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”):

Grayscale Bitcoin Trust (BTC) and Grayscale Digital Large Cap Fund LLC (GDLC).

Grayscale Bitcoin Trust (BTC), Grayscale Bitcoin Cash Trust (BCH), Grayscale Ethereum Classic Trust (ETC), Grayscale Litecoin Trust (LTC), and Grayscale Digital Large Cap Fund LLC .

Authorized Participants of the Trust are the only entities who may place orders to create or, if permitted, redeem Baskets.

4 unchanged sentences

The Custodian is responsible for safeguarding the ETH, Incidental Rights, and IR Virtual Currency held by the Trust, and holding the private key(s) that provide access to the Trust’s digital wallets and vaults.

The Custodian Agreement is for an initial term of three years .

The transfer agent for the Trust (the “Transfer Agent”) is Continental Stock Transfer & Trust Company.

7 unchanged sentences

Summary of Significant Accounting Policies

In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2021 and December 31, 2020 and results of operations for the three and six months ended June 30, 2021 and 2020 have been made.

The results of operations for the periods presented are not necessarily indicative of the

results of operations expected for the full year.

In the opinion of management of the Sponsor of the Trust, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2021 and December 31, 2020 and results of operations for the three and nine months ended September 30, 2021 and 2020 have been made.

The results of operations for the periods presented are not necessarily indicative of the results of operations expected for the full year.

These unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K.

16 unchanged sentences

Therefore, the Trust looks to the Authorized Participant when assessing entity-specific and market-based volume and level of activity for Digital Asset Markets.

The Authorized Participant transacts in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined in the FASB Master Glossary (collectively, “Digital Asset Markets”).

The Authorized Participant transacts in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined in the FASB ASC Master Glossary (collectively, “Digital Asset Markets”).

The Authorized Participant, as a related party of the Sponsor, provides information about the Digital Asset Markets on which it transacts to the Trust.

32 unchanged sentences

(Amounts in thousands)

June 30, 2021

September 30, 2021

Investment in ETH

3 unchanged sentences

ETH is held by the Custodian on behalf of the Trust and is carried at fair value.

As of June 30, 2021 and December 31, 2020, the Trust held 3,154,033.47769444 and 2,937,122.40311770 ETH, respectively.

The Trust determined the fair value per ETH to be $ 2,243.98 and $ 744.99 on June 30, 2021 and December 31, 2020, respectively, using the price provided at 4:00 p.m., New York time, by the Digital Asset Exchange Market considered to be the Trust’s principal market (Coinbase Pro).

As of September 30, 2021 and December 31, 2020, the Trust held 3,134,220.55748986 and 2,937,122.40311770 ETH, respectively.

The Trust determined the fair value per ETH to be $ 2,992.38 and $ 744.99 on September 30, 2021 and December 31, 2020, respectively, using the price provided at 4:00 p.m., New York time, by the Digital Asset Exchange Market considered to be the Trust’s principal market (Coinbase Pro).

The following represents the changes in quantity of ETH and the respective fair value:

16 unchanged sentences

Net realized gain on investment in ETH

Balance at June 30, 2021

Balance at September 30, 2021

3,134,220.55748986

Creations and Redemptions of Shares

At June 30, 2021 and December 31, 2020, there were an unlimited number of Shares authorized by the Trust.

At September 30, 2021 and December 31, 2020, there were an unlimited number of Shares authorized by the Trust.

The Trust creates (and, should the Trust commence a redemption program, redeems) Shares from time to time, but only in one or more Baskets.

2 unchanged sentences

dollar value of accrued but unpaid fees and expenses of the Trust, by (y) the number of Shares outstanding at such time and multiplying the quotient obtained by 100.

Each Share represented approximately 0.0102 and 0.0103 of one ETH at June 30, 2021 and December 31, 2020, respectively.

Each Share represented approximately 0.0101 and 0.0103 of one ETH at September 30, 2021 and December 31, 2020, respectively.

The decrease in the number of ETH represented by each Share since inception is primarily a result of the Share Split and, to a lesser degree, the periodic withdrawal of ETH to pay the Sponsor’s Fee.

22 unchanged sentences

In accordance with GAAP, the Trust has defined the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the applicable taxing authority and requires measurement of a tax position meeting the “more-likely-than-not” threshold, based on the largest benefit that is more than 50% likely to be realized.

Tax positions not

deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current period.

As of and during the periods ended June 30, 2021 and December 31, 2020 , the Trust did not have a liability for any unrecognized tax amounts.

Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as a tax benefit or expense in the current period.

As of and during the

periods ended September 30, 2021 and December 31, 2020 , the Trust did not have a liability for any unrecognized tax amounts.

However, the Sponsor’s conclusions concerning its determination of “more-likely-than-not” tax positions may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance, and on-going analyses of and changes to tax laws, regulations and interpretations thereof .

The Sponsor of the Trust has evaluated whether or not there are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions related to federal, state and local income taxes existed as of June 30, 2021 or December 31, 2020.

Related Parties

1 unchanged sentence

DCG, Genesis, Grayscale and TradeBlock, Inc.

As of June 30, 2021 and December 31, 2020, 7,992,732 and 10,803,454 Shares of the Trust were held by related parties of the Trust, respectively.

As of September 30, 2021 and December 31, 2020, 5,345,715 and 10,803,454 Shares of the Trust were held by related parties of the Trust, respectively.

The Sponsor’s parent, an affiliate of the Trust, holds a minority interest in Coinbase, Inc., the parent company of the Custodian, that represents less than 1.0 % of Coinbase Inc.’s ownership.

7 unchanged sentences

dollar value of ETH is determined by reference to the Digital Asset Exchange Market that the Trust considers its principal market as of 4:00 p.m., New York time, on each valuation date .

The Trust held no Incidental Rights or IR Virtual Currency as of June 30, 2021 and December 31, 2020.

No Incidental Rights or IR Virtual Currencies have been distributed in payment of the Sponsor’s Fee during the three and six months ended June 30, 2021 and 2020.

The Trust held no Incidental Rights or IR Virtual Currency as of September 30, 2021 and December 31, 2020.

No Incidental Rights or IR Virtual Currencies have been distributed in payment of the Sponsor’s Fee during the three and nine months ended September 30, 2021 and 2020.

As partial consideration for receipt of the Sponsor’s Fee, the Sponsor is obligated under the Trust Agreement to assume and pay all fees and other expenses incurred by the Trust in the ordinary course of its affairs, excluding taxes, but including marketing fees;

11 unchanged sentences

dollars or other fiat currencies at the Actual Exchange Rate or (y) cause the Trust (or its delegate) to deliver such ETH, Incidental Rights and/or IR Virtual Currency in kind in satisfaction of such Additional Trust Expenses.

For the three months ended June 30, 2021 and 2020, the Trust incurred Sponsor’s Fees of $ 51,088,338 and $ 1,752,785 , respectively.

For the six months ended June 30, 2021 and 2020, the Trust incurred Sponsor’s Fees of $ 80,358,707 and $ 2,530,930 , respectively.

As of June 30, 2021 and December 31, 2020, there were no accrued and unpaid Sponsor’s Fees.

For the three months ended September 30, 2021 and 2020, the Trust incurred Sponsor’s Fees of $ 56,382,203 and $ 4,339,918 , respectively.

For the nine months ended September 30, 2021 and 2020, the Trust incurred Sponsor’s Fees of $ 136,740,910 and $ 6,870,848 , respectively.

As of September 30, 2021 and December 31, 2020, there were no accrued and unpaid Sponsor’s Fees.

In addition, the Sponsor may pay Additional Trust Expenses on behalf of the Trust, which are reimbursable by the Trust to the Sponsor.

For the three and six months ended June 30, 2021 and 2020, the Sponsor did no t pay any Additional Trust Expenses on behalf of the Trust.

For the three and nine months ended September 30, 2021 and 2020, the Sponsor did no t pay any Additional Trust Expenses on behalf of the Trust.

Risks and Uncertainties

5 unchanged sentences

If Digital Asset Markets continue to experience significant price fluctuations, the Trust may experience losses.

Several factors may affect the price of ETH, including, but not limited to, global ETH supply and demand, theft of ETH from global exchanges or vaults, competition from other forms of digital currency or payment services, global or regional political, economic or financial conditions, and events and situations.

The ETH held by the Trust are commingled and the Trust’s shareholders have no specific rights to any specific ETH.

20 unchanged sentences

Financial Highlights Per Share Performance

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Per Share Data:

8 unchanged sentences

Ratios of net investment loss and expenses to average net assets have been annualized.

An i nd i v i du a l s hareholde r ’ s r eturn , ratios, and per Share performance m a y va r y from those presented above b a s e d on the ti m ing of S h a re t r ansac ti ons.

An i nd i v i du a l shareholde r ’ s r eturn , ratios, and per Share performance m a y va r y from those presented above b a s e d on the ti m ing of S h a re t r ansac ti ons.

Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and assuming redemption on the last day of the period and has been annualized.

5 unchanged sentences

Subsequent Events

As of the close of business on August 2, 2021 the fair value of ETH determined in accordance with the Trust’s accounting policy was $ 2,601.76 per ETH.

As of the close of business on November 1, 2021 the fair value of ETH determined in accordance with the Trust’s accounting policy was $ 4,367.75 per ETH.

There are no known eve nts that have occurred that require disclosure other than that which has already been disclosed in these notes to the financial statements.

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 1. Financial Statements