Grayscale, the crypto asset management firm, is in the process of transforming its Grayscale Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF), as per Bloomberg ETF specialist Eric Balchunas.
This strategic initiative aims to offer investors a diversified portfolio featuring prominent digital assets, including Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP, and Avalanche (AVAX).
Diverse Exposure to Bitcoin, Ethereum, and Others
The proposed ETF emerges at a time when there is growing investor interest in regulated cryptocurrency offerings. Grayscale’s Digital Large Cap Fund reportedly manages around $524 million in assets, heavily weighted towards Bitcoin and Ethereum.
Currently, about 75% of the fund’s assets are invested in Bitcoin, with approximately 19% allocated to Ethereum, while the remainder is invested in Solana, XRP, and Avalanche.
As indicated by reports, this diversified strategy is crafted to provide a balanced entry point for investors aiming for broader participation in the cryptocurrency market.
The New York Stock Exchange (NYSE) previously submitted a 19b-4 application on Grayscale’s behalf, seeking approval from the Securities and Exchange Commission (SEC) to modify its regulations to facilitate the listing of this new ETF.
This filing follows a significant year for the market, having witnessed the approval of spot ETFs for Bitcoin and Ethereum in January and July, respectively, enabling these funds to hold actual tokens instead of relying solely on futures contracts.
This development comes after years of denials of such index funds, spurred by a court ruling favoring Grayscale that influenced the SEC, led by Gary Gensler, to reassess its position.
Grayscale Targets Fifth ETF Launch This Year
The successful conversion of Grayscale’s Digital Large Cap Fund into an ETF would signify the firm’s fifth launch of the year, underscoring its strategy to broaden its product line in response to rising demand for varied digital asset exposure.
Balchunas remarked that the ETF’s holdings, mainly consisting of Bitcoin and Ethereum, could provide sufficient flexibility to include smaller, less liquid assets, which may facilitate the approval process.
Throughout the year, Grayscale’s Bitcoin and Ethereum funds have experienced notable outflows, with approximately $20 billion and $3 billion withdrawn, respectively.
In response to these withdrawals, the company has launched lower-fee versions of these funds, drawing over $700 million in inflows so far. These changes have contributed to a rise in Bitcoin and Ethereum prices, signaling renewed investor confidence in the cryptocurrency sector.
Other asset managers are also gearing up to launch ETFs that encompass smaller tokens like Solana, XRP, and Litecoin, with recent filings from Canary Capital and Bitwise Invest exemplifying a broader trend towards integrating various cryptocurrencies into regulated financial products, amid intensified scrutiny from US regulators.
At the time of this writing, the leading cryptocurrency, BTC, is trading at $67,750, reflecting a significant 11% increase over the past week.
Featured image from DALL-E, chart from TradingView.com
