10-K: Grayscale Ethereum Classic Trust Reports 2025 Net Asset Decline

Grayscale Ethereum Classic Trust (ETC) reported a significant 55% decrease in net assets for the year ended December 31, 2025, primarily due to ETC price depreciation.

Summary

• The Trust's net assets decreased by 55% to $126,004 thousand for the year ended December 31, 2025, down from $283,055 thousand at December 31, 2024.
• The ETC price depreciated from $25.13 per ETC as of December 31, 2024, to $11.47 per ETC as of December 31, 2025.
• A net realized and unrealized loss on investment of ($151,890) thousand was recorded for the year ended December 31, 2025.
• The Sponsor's Fee for the year ended December 31, 2025, was $5,161 thousand.
• As of December 31, 2025, the Trust held approximately 7% of the total ETC in circulation.
• The Trust's Shares were quoted on OTCQX at a 28% discount to the Trust's NAV per Share as of December 31, 2025.
• The ETC block reward was reduced by 20% to 2.048 ETC per block in May 2024, following previous reductions in March 2020 and April 2022.
• The Ethereum Classic Network is expected to implement an 'Olympia' upgrade in May 2025, integrating fee-market mechanisms and establishing an on-chain treasury and governance framework.
• Digital Currency Group, Inc. (DCG), the indirect parent company of the Sponsor, has an authorization to purchase up to $200 million worth of Shares across various Grayscale products, but made no purchases of Trust Shares from January 1, 2022, through March 6, 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as negative due to the significant decline in net assets and ETC price, coupled with the persistent discount to NAV and ongoing market volatility and regulatory uncertainties in the digital asset space.

Positives

• The SEC entered court-approved joint stipulations to dismiss charges against Binance, Coinbase, and Kraken between February 2025 and May 2025, reducing regulatory uncertainty for some digital asset market participants.
• The GENIUS Act was signed into law in July 2025, providing specific federal regulation for stablecoins in the United States.
• SEC Chairman Atkins announced 'Project Crypto' in July 2025, a Commission-wide initiative to modernize securities rules for digital assets and promote innovation in the U.S.
• The Sponsor maintains a robust cyber risk management program, supervised by a dedicated Chief Information Security Officer, with annual third-party risk assessments and mandatory employee training.

Negatives

• Net assets decreased significantly by 55% to $126,004 thousand for the year ended December 31, 2025.
• The ETC price depreciated from $25.13 per ETC to $11.47 per ETC during 2025.
• The Trust recorded a net realized and unrealized loss on investment of ($151,890) thousand in 2025.
• Shares traded at a substantial 28% discount to the Trust's NAV per Share as of December 31, 2025.
• The Trust does not operate an ongoing redemption program, which can lead to significant premiums or discounts between the Share price and NAV.
• The Ethereum Classic Network has been the target of multiple 51% double-spend attacks in the past (January 2019, August 2020), leading to transaction reversals and market capitalization reductions.
• The digital asset economy experienced extreme volatility and disruption in 2022, including the FTX collapse and other insolvencies, leading to a loss of confidence and market-wide liquidity declines.
• The U.S. government's Digital Asset Stockpile Executive Order (March 6, 2025) stated no additional acquisition of digital assets other than Bitcoin for the stockpile, which negatively impacted the price of ETC.

Risks

• Extreme volatility of trading prices for digital assets, including ETC, could lead to a material adverse effect on Share value, potentially resulting in a loss of all or substantially all value.
• The medium-to-long term value of Shares is subject to factors related to the capabilities and development of blockchain technologies and the fundamental investment characteristics of digital assets.
• Digital assets represent a relatively new and rapidly evolving industry, and the value of Shares depends on the acceptance of ETC.
• Digital assets may have concentrated ownership, and large sales or distributions by holders could adversely affect the market price of such digital assets.
• A temporary or permanent fork or a clone of the Ethereum Classic Network could adversely affect the value of the Shares.
• Recent developments in the digital asset economy have led to extreme volatility, disruption, loss of confidence, negative publicity, and market-wide declines in liquidity.
• The value of the Shares relates directly to the value of ETC held by the Trust, which may be highly volatile and subject to fluctuations due to various factors.
• The largely unregulated nature and lack of transparency surrounding the operations of Digital Asset Trading Platforms may lead to fraud, market manipulation, business failures, security failures, or operational problems.
• Digital Asset Trading Platforms may be exposed to front-running and wash-trading.
• The Index has a limited history, and a failure of the Index Price could adversely affect the value of the Shares.
• Competition from the emergence or growth of other digital assets could negatively impact the price of ETC and adversely affect the value of the Shares.
• The Trust relies on third-party service providers (Custodian, Authorized Participant); disruptions or replacements could pose challenges to safekeeping ETC and Trust operations.
• Uncertain legal rights of customers regarding digital assets held by third-party custodians in insolvency proceedings.
• Due to the Rule 144 holding period, lack of an ongoing redemption program, and ability to halt creations, there is no arbitrage mechanism to keep Share value closely linked to the Index Price, leading to historical premiums or discounts.
• Non-concurrent trading hours between OTCQX and the Digital Asset Trading Platform Market can cause Shares to trade at a price different from the Trust's NAV per Share.
• Shareholders may suffer a loss if Shares trade above or below the Trust's NAV per Share.
• Extraordinary expenses, tax liabilities from ETC sales without distributions, indemnification obligations, intellectual property claims, and disruptions from pandemics or other disasters could adversely affect Share value.
• A determination that ETC or any other digital asset is a security may adversely affect ETC value, Share value, and could result in extraordinary expenses or Trust termination.
• Regulatory changes or actions by the U.S. Congress or any U.S. federal or state agencies may affect Share value or restrict ETC use, mining activity, or network operations.
• Regulatory changes or other events in foreign jurisdictions may affect Share value or restrict ETC use, mining activity, or network operations.
• If regulators subject an Authorized Participant, the Trust, or the Sponsor to regulation as a money service business or money transmitter, it could result in extraordinary expenses and decreased liquidity for Shares.
• Statutory or regulatory changes or interpretations could obligate the Trust or the Sponsor to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses.
• The uncertain and evolving tax treatment of the Trust, digital assets, ETC, and transactions involving ETC under U.S. federal, state, and local tax laws could adversely affect Share value.
• Potential conflicts of interest may arise among the Sponsor or its affiliates and the Trust.
• Shareholders cannot be assured of the Sponsor's continued services; discontinuance may be detrimental to the Trust.
• If the Custodian resigns or is removed by the Sponsor or otherwise, without replacement, it would trigger early termination of the Trust.
• The amount of the Trust's assets represented by each Share will decline over time as the Trust pays the Sponsor's Fee and Additional Trust Expenses.
• ETC transactions are irrevocable, and stolen or incorrectly transferred ETC may be irretrievable, adversely affecting Share value.
• The lack of full insurance and shareholders' limited rights of legal recourse against the Trust, Trustee, Sponsor, Transfer Agent, and Custodian expose the Trust and its shareholders to the risk of loss of ETC for which no person or entity is liable.
• The Trust may be required, or the Sponsor may deem it appropriate, to terminate and liquidate at a time that is disadvantageous to shareholders.
• The Trust Agreement includes provisions that limit shareholders' voting rights and restrict their right to bring a derivative action.
• The Sponsor is solely responsible for determining the value of the NAV and NAV per Share; errors, discontinuance, or changes in such calculations may adversely affect Share value.
• Shareholders may not receive the benefits of any forks or airdrops due to operational, tax, securities law, regulatory, legal, and practical issues.

Future Outlook

The Ethereum Classic Network is planning an 'Olympia' upgrade in May 2025 to integrate fee-market mechanisms and establish an on-chain treasury and governance framework. The Sponsor intends to engage additional unaffiliated Authorized Participants in the future. The Trust currently has no intention of seeking regulatory approval to operate an ongoing redemption program. The SEC's ongoing 'Project Crypto' initiative, launched in July 2025, aims to modernize securities rules for digital assets and develop a comprehensive regulatory framework, which could significantly impact the digital asset industry.

Management Comments

• The Sponsor believes that the security procedures in place for the Trust, including, but not limited to, offline storage, or cold storage, multiple encrypted private key shards, usernames, passwords and 2-step verification, are reasonably designed to safeguard the Trusts ETC.
• The Sponsor believes the Index Providers selection process for Constituent Trading Platforms as well as the methodology of the Index Prices algorithm provides a more accurate picture of ETC price movements than a simple average of Digital Asset Trading Platform spot prices, and that the weighting of ETC prices on the Constituent Trading Platforms limits the inclusion of data that is influenced by temporary price dislocations that may result from technical problems, limited liquidity or fraudulent activity elsewhere in the ETC spot market.
• The Sponsor intends to evaluate each fork, airdrop or similar occurrence on a case-by-case basis in consultation with the Trusts legal advisers, tax consultants, and Custodian, and may decide to abandon any Incidental Rights or IR Virtual Currency resulting from a hard fork, airdrop or similar occurrence should the Sponsor conclude, in its discretion, that such abandonment is in the best interests of the Trust.

Industry Context

StockSavvy.ai notes that the digital asset market continues to be highly volatile and subject to significant regulatory scrutiny, as evidenced by the FTX collapse in 2022 and subsequent enforcement actions. However, recent SEC dismissals of charges against major exchanges like Binance, Coinbase, and Kraken, along with new legislative efforts like the GENIUS Act and Project Crypto, suggest a potential shift towards a more defined regulatory framework in the U.S. The underperformance of ETC compared to Bitcoin and Ether, and its smaller market capitalization, highlights the competitive pressures from other digital assets and smart contract platforms. The continued reliance on proof-of-work for ETC, in contrast to Ethereum's transition to proof-of-stake, also positions it differently within the evolving blockchain landscape.

Comparison to Industry Standards

• ETC was the 40th largest digital asset by market capitalization (~$1.8 billion) as of December 31, 2025, significantly smaller than Bitcoin and Ether, which have substantially larger market caps.
• The Ethereum Classic Network handled approximately 0.18 transactions per second as of December 31, 2025, compared to the Ethereum Network's approximately 25 transactions per second, indicating significantly lower scalability and throughput.
• ETC average daily transaction fees ranged from $0.001 to $0.079 per transaction in 2025, which is considerably lower than Ether's average daily transaction fees ranging from $0.13 to $29.46 per transaction in the same period.
• The Bitcoin network facilitated daily transaction values between approximately $2.9 billion and $54.5 billion in 2025, vastly exceeding Ethereum Classic's daily transaction values of $7.1 million to $575.4 million.
• The Trust's historical average premium of 98% and average discount of 45% (May 2018 Dec 2025) to NAV per Share, with a 28% discount at year-end 2025, indicates a significant divergence from the underlying asset value, a common issue for unredeemable closed-end funds in the crypto space, but still a notable spread.

Management Changes

Corporate Governance

Legal Proceedings

• On May 19, 2025, Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd. filed a complaint in the United States Bankruptcy Court for the Southern District of New York against Digital Currency Group, Inc. (DCG) and certain affiliates, including GSO (former Co-Sponsor). The complaint alleges preferential transfers of 105 Bitcoin and 37,647.06 Ethereum Classic tokens to GSI (predecessor to GSO) during the preference period prior to Genesis Capital's bankruptcy filing. GSO believes this lawsuit is without merit and intends to vigorously defend against it.
• On January 17, 2025, DCG agreed to entry of a cease-and-desist order and payment of a $38 million civil money penalty arising out of SEC allegations that DCG negligently engaged in conduct that misled investors about the impact of a default on Genesis Capital's financial condition and created a materially false impression to the public regarding Genesis Capital's financial health.

Related Party Transactions

• The Sponsor, Grayscale Investments Sponsors, LLC, is a consolidated subsidiary of Digital Currency Group, Inc. (DCG).
• Grayscale Securities, LLC, the sole acting Authorized Participant and distributor/marketer for the Shares, is an affiliate of the Sponsor and a consolidated subsidiary of DCG.
• DCG holds a minority interest of less than 1.0% in Kraken, one of the Digital Asset Trading Platforms included in the Index.
• DCG has investments in a large number of digital assets and companies involved in the digital asset ecosystem, including trading platforms and custodians.
• The Trust pays the Sponsor an annual fee of 2.5% of the NAV Fee Basis Amount, payable in ETC.
• The Sponsor may appoint itself or an affiliate as an agent to act on behalf of shareholders in connection with any distribution of Incidental Rights and/or IR Virtual Currency.
• Several employees of the Sponsor and DCG are FINRA-registered representatives who maintain their licenses through Grayscale Securities.

Stakeholder Impact

• Shareholders experienced a significant decrease in net assets and ETC price in 2025, facing risks from market volatility, the lack of a redemption program (leading to premiums/discounts), potential security breaches, and regulatory changes. Their voting rights are limited, and the ability to bring derivative actions is restricted.
• The Sponsor (Grayscale Investments Sponsors, LLC) continues to manage the Trust and receives a 2.5% annual fee. It faces potential conflicts of interest due to its affiliations with other service providers and DCG's broader digital asset investments.
• Digital Currency Group, Inc. (DCG), the indirect parent of the Sponsor and Authorized Participant, faces ongoing legal proceedings related to Genesis Capital's bankruptcy and SEC allegations, which could impact its reputation and financial health.
• The Custodian (Coinbase Custody Trust Company, LLC) continues to safeguard the Trust's ETC, but its liability is limited, and there are uncertainties regarding the legal treatment of custodied digital assets in insolvency.
• The Ethereum Classic Network faces risks from 51% attacks, competition from other digital assets, and potential negative public opinion due to the energy consumption of mining. The upcoming Olympia upgrade aims to enhance its functionality and governance.

Next Steps

• The Ethereum Classic Network plans to implement the 'Olympia' upgrade in May 2025, which will integrate fee-market mechanisms and establish an on-chain treasury and governance framework.
• The Sponsor intends to engage additional Authorized Participants unaffiliated with the Trust in the future.
• The SEC's crypto task force and 'Project Crypto' initiative will continue to work on developing a comprehensive and clear regulatory framework for digital assets.

Key Dates

Recommendation

The Grayscale Ethereum Classic Trust (ETC) experienced a substantial decline in net assets and ETC price in 2025, reflecting the inherent volatility and risks in the digital asset market. While regulatory clarity is slowly emerging with recent SEC dismissals and legislative efforts, the Trust's lack of a redemption mechanism continues to expose shareholders to significant premiums or discounts to NAV, which was a 28% discount at year-end 2025. The ongoing legal proceedings involving DCG and past 51% attacks on the ETC network add layers of uncertainty. Given the high-risk, high-reward nature of digital asset investments and the specific structural limitations of this Trust, a 'Hold' recommendation is appropriate for existing investors who are comfortable with the long-term speculative nature of ETC and the Trust's structure, awaiting further market stabilization and potential operational improvements like a redemption program. New investors should approach with extreme caution due to the significant risks and historical underperformance relative to its NAV.

Keywords

Ethereum Classic, ETCG, Grayscale, Digital Asset Trust, Cryptocurrency, Blockchain, SEC Filing, 10-K, Investment, Digital Assets, ETC, Grayscale Investments, Crypto