Grayscale, the largest digital asset management firm, has taken steps to convert its Digital Large Cap Fund into an Exchange-Traded Fund (ETF). The fund currently tracks various cryptocurrencies like Bitcoin, Ethereum, Solana, XRP, and Avalanche, and is awaiting approval from the U.S. Securities and Exchange Commission (SEC). This move by Grayscale reflects the company’s ambition to expand and solidify its position in the crypto ETF market.
Grayscale has been actively involved in the ETF market for some time. With the support of the Digital Currency Group, the company has played a significant role in the push for spot Bitcoin ETFs in the United States. It recently achieved a major victory against the SEC in its efforts to convert the Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF. Since then, Grayscale has shifted its focus towards growing its ETF business, including obtaining approval to convert the Ethereum Trust into a spot ETF.
To convert its Digital Large Cap Fund into an ETF, Grayscale has filed a 19b-4 form seeking approval from the SEC. Currently, investors can invest in a portfolio of top cryptocurrencies through the fund, but the conversion to an ETF will provide easier access to the fund and increased liquidity.
The interest in cryptocurrency products from institutional investors continues to grow, with more Wall Street players entering the market. Nate Geraci, President of the ETF Store, has highlighted the increasing interest in crypto-based ETFs, noting that investors are redirecting their attention towards these products.
The conversion of the Digital Large Cap Fund follows two other significant actions by Grayscale this year. Prior to these actions, the GBTC and ETHE had also received approval from the SEC to convert into ETFs. These moves to ETFs have brought about significant changes in the market and among investors.
Previously, GBTC shares traded at a discount of up to 44% compared to the spot price of BTC. This discount made it more affordable for investors to buy Bitcoin through the trust. However, after the switch to an ETF, the discount disappeared and GBTC traded at a premium or at par with the underlying Bitcoin. As a result, many investors sold their shares to capitalize on the new pricing. Since then, crypto assets like GBTC have experienced outflows of $21 billion, and the ETH ETF saw a $3 billion outflow after its conversion in July.
The SEC has historically been reluctant to approve spot crypto ETFs, but these recent developments suggest a potential shift. Grayscale’s previous legal victory in the Bitcoin ETF case sets a precedent, and the company may use a similar strategy if the SEC does not promptly approve the conversion of the Digital Large Cap Fund.
Meanwhile, other companies are also pushing for new ETF products. Canary Capital, for example, has applied to launch a Litecoin ETF and recently filed for an XRP ETF.