Industry Updates

ETC Group to close proof-of-work ethereum ETP six weeks after launch

Ethereum PoW is down over 40% since hard fork

Theo Andrew

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ETC Group is set to close its proof-of-work (PoW) ethereum ETP less than two months after launch.

In a shareholder notice, ETC Group said the decision was taken to close the ETC Group Physical EthereumPoW (ZETW) “on the basis no eligible depository can provide custody” of ethereum PoW (ETHW).

The issuer announced the launch of ZETW in the week before ethereum’s merge to the proof-of-stake (PoS) on 15 September, in a bid to give investors access to the ‘forked’ PoW ethereum chain.

However, ETC Group issued a mandatory redemption notice on ZETW last week due to the inability to provide physical delivery of ethereum PoW as underlying of the bonds.

As a result, the issuer said it would try to sell the underlying assets using a cryptocurrency auction procedure – to be determined at a later date – in which bids can be accepted for as little as 80% of the reference price.

Should the assets fail to be sold under auction, the issuer is entitled to sell underlying cryptocurrency via "any other reasonable procedure" which could be "substantially less" than the minimum auction price. 

Bradley Duke, founder and co-CEO at the ETC Group, told ETF Stream the reason behind the launch was to allow investors to profit from the hard fork if it became a success. 

“It was only envisaged that the ETP could be a long-term investment if [the hard fork] became an overnight success," he said.

ETHW has lost over 40% of its value in the last month and is currently trading at $6.37, compared to $1,570 for ethereum PoS (ETHS) which has risen by 22.9% over the same period.

Following the hard fork, the ETHetc ETC Group Physical Ethereum (ZETH) automatically switched to the PoS network, in line with the merge.

Simultaneously, holders of ZETH received shares in ZETW on a 1:1 basis in a bid to benefit from the fork event.

It comes after the widely anticipated ethereum merge to the PoS system caused a rift within the digital asset community, with some miners unhappy about the switch to the eco-friendlier network.

This led to the hard fork which saw the original ethereum chain split into two, covering both the PoS and PoW networks.

ETC Group was the first issuer to announce its plans following the merge with others taking a wait-and-see approach.

CoinShares said at the time of the merge it would look to share a portion of the PoW token with investors within its existing ethereum ETP but added it “continues to monitor the situation”.

21Shares launched Europe’s first short ethereum ETP and the cheapest physically-backed ethereum product in the week following the transition.

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