As a seasoned researcher who has followed the crypto market for years, I find Grayscale’s latest move to convert its Digital Large Cap Fund into an exchange-traded fund (ETF) intriguing. Having witnessed the transformation of GBTC and ETHE into ETFs earlier this year, it seems that Grayscale is capitalizing on the SEC’s recent shift in stance towards spot crypto ETFs.
Grayscale, a crypto asset management firm, has submitted an application to the U.S. Securities and Exchange Commission for converting their existing $520 million multi-crypto fund into a tradeable stock product known as an Exchange-Traded Fund (ETF).
On October 14th, Grayscale filed a 19b-4 document with the Securities and Exchange Commission (SEC), asking for the NYSE to be able to list a new Exchange Traded Fund (ETF) by making changes to existing rules. This was done on behalf of the New York Stock Exchange (NYSE).
Grayscale’s Digital Large Cap Fund manages just over $524 million in assets and is weighted with a 76% allocation to Bitcoin (BTC), followed by 18% to Ether (ETH), and the remainder is split between Solana (SOL), XRP (XRP), and Avalanche (AVAX).
Through a recent filing (Form 8-K), Grayscale has informed its investors that the fund now aligns with the regulatory and listing adjustments suggested by the New York Stock Exchange. By transforming into a spot ETF, investors can find it simpler to purchase and offload shares in this fund.
Grayscale recently submitted a document after undergoing two significant changes earlier in the year, where the Securary and Exchange Commission gave approval for Grayscale’s Bitcoin Trust (GBTC) and Ethereum Trust (ETHE) to be transformed into Exchanged-Traded Funds (ETFs).
Previously, the Securities and Exchange Commission (SEC) denied every request for a traditional cryptocurrency exchange-traded fund (ETF). However, following a court ruling in August that went in favor of Grayscale, the SEC altered its stance on these ETFs.
Spot ETFs hold the underlying assets on their books, as compared to trusts and other non-spot crypto funds that rely on futures contracts to track prices, which have added regulatory proceedings that made it more difficult for investors to buy and sell shares in the funds.
After converting to Exchange-Traded Funds (ETFs), Grayscale investors started offloading their shares because there was a significant increase in the difference between the fund’s market price and its actual asset value.
Prior to the transformation of GBTC into an ETF, investors had the opportunity to purchase GBTC shares at a 44% reduced price compared to directly buying Bitcoin. According to YCharts data, this was six months before the conversion. Once the fund was converted and pricing inconsistencies were eliminated, GBTC investors took advantage of this difference by cashing out.
Since its conversion in January, the company’s Bitcoin investment fund has experienced withdrawals totaling approximately $21 billion. Meanwhile, the Ethereum Exchange-Traded Fund has recorded about $3 billion in withdrawals since its conversion back in July.
On the 10th of October, Grayscale expanded their watchlist by incorporating 35 different cryptocurrencies such as Dogecoin (DOGE), Worldcoin (WLD), and Jupiter (JUP). These digital assets are being evaluated for potential future investment offerings.
It’s also been launching a new crypto fund roughly once every month, unveiling an Aave investment fund on Oct. 3, an XRP Trust on Sept. 12, and an Avalanche fund on Aug. 22.
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2024-10-16 04:41