Grayscale Introduces Multi-Crypto Exchange-Traded Fund (ETF) including Bitcoin, Ethereum, and More
Grayscale, a crypto asset management company, submitted a request to the U.S. Securities and Exchange Commission (SEC) on October 14 to transform its diversified cryptocurrency portfolio into an ETF.
The Digital Large Cap (GDLC) fund, currently managed by the firm, holds assets worth $524 million and covers a range of cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Ripple (XRP), and Avalanche (AVAX).
BTC and ETH together account for more than 90% of the fund’s assets.
If the proposal is accepted, the ETF will be listed on the New York Stock Exchange (NYSE) as indicated in the filing. Grayscale also informed its investors about the planned modifications to the fund through a separate filing.
Competition in the Crypto Index ETF Arena
Conversion of a fund into an ETF simplifies the process of buying and selling the fund’s shares. Grayscale successfully converted two funds associated with BTC (GBTC) and ETH (ETHE) into ETFs this year.
However, at present, only BTC and ETH have been recognized as commodities by the SEC. Notably, other issuers like Hashdex and Franklin Templeton, who have filed applications for similar crypto index ETFs, have only included BTC and ETH in their proposals.
Interestingly, Grayscale opted to include XRP in its ETF despite the lack of regulatory clarity due to its ongoing legal issues with the SEC.
According to Nate Geraci from ETF Store, this move could be seen as a speculation on potential changes in regulation post the U.S. elections in November. He commented,
“It seems like issuers are gearing up for a potential shift in administration. They are preparing for a scenario where the administration is more favorable towards cryptocurrencies in the event of a Trump re-election.”
On the other hand, Presto Research, a research firm focusing on cryptocurrencies, perceived Grayscale’s application as a possible gateway to approval for altcoin ETFs.
“The approval of this ETF could potentially open doors for future altcoin ETFs, including SOL, XRP, and AVAX, which are still uncertain about their ETF eligibility under the current SEC regulations.”
Despite this optimistic outlook, analysts from Presto Research cautioned that the approval process might face obstacles, pointing out the challenges experienced in August with spot SOL ETFs.
Grayscale’s converted ETFs have witnessed significant outflows since their transformation, visible in the outflows from GBTC and ETHE. GBTC has seen outflows exceeding $20 billion, while ETHE recorded almost $3 billion in outflows post its conversion.
The future trajectory of the application post the U.S. elections, and the likelihood of approval for other altcoins facing regulatory uncertainties, remains uncertain.