Shares in fund manager Grayscale Investments' Ethereum Trust plummeted by 50% this past fortnight, despite Ethereum rallying by 75% over the same period.

ETHE shares correspond 0.09620794 of an Ether each and are currently trading for $13.fourscore — roughly a 21% premium over the spot price of ETH.

Grayscale's ETHE shares accept been on a roller coaster ride, surging effectually 500% from $4.20 at the start of October, before topping out at $25 on Dec. 22. The shares have since plummeted by 50%, posting a local low of $12 on Jan. 5.

ETHE 12-month price chart: TradingView

Joshua Frank, the CEO of crypto data aggregator TheTie, took to Twitter to offering a theory explaining the unusual price activity.

Frank argued that institutional arbitrage may be fueling Ether's recent gains, speculating that investors are buying ETH to close out loans used to purchase shares in Grayscale'south Ethereum Trust.

He suggested that many Ethereum Trust investors borrowed Ethereum at an annual interest of roughly viii%, before using the borrowed assets to purchase ETHE shares at the equivalent of Ethereum's spot price to capitalize on the arbitrage opportunity presented by ETHE's historic cost premium — with ETHE having traded at a 100% premium over Ether in tardily December.

With the lock-up on many investors' shares having expired, Frank concludes that ETHE investors are at present selling their shares while purchasing Ether on the spot markets to close out their positions and realize a profit.

"A large number of Grayscale'south ETHE investors via individual placements received their shares today. ETH'south run the terminal few days might be in large function due to those institutions ownership ETH to encompass their loans."

He added: "This is likely a big part of the reason ETH had a massive run-up this weekend, why ETHE cruel today (despite ETH'southward massive run this weekend), and why the premium on ETHE has fallen so drastically."

The decease of ETHE shares' lock-upward is unlikely to be the sole goad for Ether's contempo bullish momentum, with Chicago Mercantile Substitution announcing plans to launch ETH futures in February along with the successful launch of phase 0 of Eth2.