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 represent 0.09620794 of an Ether each and are currently trading for $13.80 — roughly a 21% premium over the spot price of ETH.

Grayscale’s ETHE shares have been on a roller coaster ride, surging around 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 offer a theory explaining the unusual price action. 

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’s Ethereum Trust.

He suggested that many Ethereum Trust investors borrowed Ethereum at an annual interest of roughly 8%, 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 price premium — with ETHE having traded at a 100% premium over Ether in late December.

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

“A large number of Grayscale’s ETHE investors via private placements received their shares today. ETH’s run the last few days might be in large part due to those institutions buying ETH to cover their loans.”

He added: “This is likely a large part of the reason ETH had a massive run-up this weekend, why ETHE fell today (despite ETH’s massive run this weekend), and why the premium on ETHE has fallen so drastically.”

The expiry of ETHE shares’ lock-up is unlikely to be the sole catalyst for Ether’s recent bullish momentum, with Chicago Mercantile Exchange announcing plans to launch ETH futures in February along with the successful launch of phase 0 of Eth2.