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17 October, 2024

Grayscale’s New ETF Aims for Big Cryptos: Bitcoin, Ethereum, Solana, XRP, and More

17 October, 2024

Grayscale’s Big Play: A New ETF for Major Cryptos

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Crypto asset manager Grayscale is shaking things up again, aiming to transform its Grayscale Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF). This move, according to Bloomberg ETF expert Eric Balchunas, is set to offer investors a diversified portfolio encompassing major digital assets like Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP, and Avalanche (AVAX).

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Diversified Exposure To Bitcoin, Ethereum, And More

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The proposed ETF arrives at a time when investor appetite for regulated crypto products is booming. Grayscale’s Digital Large Cap Fund currently manages approximately $524 million in assets, with a clear focus on Bitcoin and Ethereum. Specifically, around 75% of the fund is allocated to Bitcoin, Ethereum takes up roughly 19%, and the remaining investments are spread across Solana, XRP, and Avalanche.

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This diversified approach is designed to offer a balanced entry point for investors eager to gain broader exposure to the cryptocurrency market.

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The New York Stock Exchange’s Role

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The New York Stock Exchange (NYSE) filed a 19b-4 application on Grayscale’s behalf, seeking the Securities and Exchange Commission’s (SEC) approval to amend its rulebook to permit the listing of this new ETF. This filing follows a significant year for the market, which witnessed the approval of spot ETFs for Bitcoin and Ethereum in January and July, respectively. These funds hold actual tokens, breaking away from the reliance on futures contracts that were the norm for so long. This shift is a direct result of a court ruling in favor of Grayscale, prompting the SEC under Gary Gensler to reconsider its stance on such index funds.

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Grayscale’s Fifth ETF Launch This Year

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If Grayscale’s Digital Large Cap Fund successfully transforms into an ETF, it will mark the firm’s fifth launch this year, showcasing its commitment to expanding its product offerings to meet the growing demand for diverse digital asset exposure. Balchunas points out that the ETF’s holdings, primarily consisting of Bitcoin and Ethereum, provide ample flexibility to accommodate smaller, less liquid assets. This could be key in paving the way for regulatory approval.

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Throughout the year, Grayscale’s Bitcoin and Ethereum funds have seen significant outflows, with around $20 billion and $3 billion withdrawn, respectively. In response, the firm introduced lower-fee versions of these funds, successfully attracting over $700 million in inflows.

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The Ripple Effect

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These approvals have undeniably contributed to a surge in Bitcoin and Ethereum prices, signaling renewed investor confidence in the cryptocurrency market. Other asset managers are positioning themselves to launch ETFs that include smaller tokens such as Solana, XRP, and Litecoin, with recent filings from Canary Capital and Bitwise Invest highlighting this trend. Despite increased scrutiny from regulators in the US, the integration of a wider range of cryptocurrencies into regulated investment vehicles is gaining momentum.

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At the time of writing, Bitcoin (BTC), the largest cryptocurrency on the market, is trading at $67,750, a substantial 11% increase on a weekly basis.