The popular arbitrage opportunity involving Grayscale's Ethereum Trust is drying up

A long-popular arbitrage opportunity in the crypto market has evaporated since the beginning of the summer, according to data compiled by The Block Research. 

The weekly premium at which Grayscale's Ethereum Trust (ETHE) trades relative to the net-asset-value (NAV) of the product has shrunk from nearly 850% in mid-June to 36% at the beginning of this week. 

The premium presents an opportunity for some hedge funds in the crypto market to capture the spread between ETHE's premium and the NAV, as The Block reported in March. At the time, the weekly premium for the product stood above 400%. The high premium gave funds the chance to purchase ETHE from Grayscale at NAV and then — after a required lock-up period — sell into the open-market to capture the premium.

It's not exactly clear what has driven premiums down, but it can be speculated that many of the funds who made the arbitrage trade have closed their positions. It may also indicate that there is less buying pressure on the retail side. 

The weekly premium for Grayscale's GBTC product has stabilized since the beginning of the year, oscillating between 8% and 41%.