Grayscale Seeks Approval to Turn SOL, XRP, and AVAX Trusts into ETFs

• Grayscale filed with the SEC to convert its $520 million Digital Large Cap Fund, which tracks multiple cryptocurrencies, into a spot ETF.
• The conversion would make it easier for investors to trade shares.

Grayscale Investments, the largest digital asset management firm, is moving to convert its Digital Large Cap Fund into an Exchange-Traded Fund (ETF). The fund, which includes popular cryptocurrencies like Bitcoin, Ethereum, Solana, XRP, and Avalanche, is presently waiting for the U.S. SEC’s approval. Grayscale’s latest action is indicative of the company’s desire to expand and strengthen its place in the crypto ETF market.

Grayscale is not a new player in the ETF market either. The company, backed by the Digital Currency Group, has played a big role in the move to get spot Bitcoin ETFs in the US and recently scored a big win against the SEC in its efforts to convert Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF. Since then, the company has shifted its focus towards growing its ETF business, including the recent approval of transforming the Ethereum Trust into a spot ETF.

Grayscale has filed a 19b-4 form to get the approval to change its Digital Large Cap Fund to an ETF. Currently, investors have the ability to invest in a basket of the best cryptocurrencies through the fund, but converting the fund to an ETF will make it easier for investors to gain exposure to the fund with increased liquidity.

Wall Street Shows Growing Interest in Cryptocurrency Products

The institutional interest in cryptocurrencies does not seem to fade away as more and more Wall Street players enter the market. Nate Geraci, the President of the ETF Store, recently discussed the growing interest in crypto-based ETFs, noting that investors are shifting their focus to such products.

The Digital Large Cap Fund conversion comes after two other significant actions by Grayscale this year. Before that, the SEC had also granted Grayscale’s petitions to transform its Bitcoin Investment Trust (GBTC) and Ethereum Investment Trust (ETHE) into ETFs. This move to ETFs has brought some significant changes in the market and the investors.

Previously to the GBTC’s conversion, its shares were trading at a discount of as much as 44% to the BTC spot price. This discount made it easier for investors to buy Bitcoin at a cheaper price through the trust. After the switch to an ETF, the discount vanished and GBTC traded at a premium or at par with the underlying bitcoin. 

Due to this, many investors disposed of their shares with the aim of making profits from the new pricing. Since then, crypto assets such as GBTC have witnessed $21 billion in outflows, and ETH ETF saw a $3 billion outflow once it changed in July.

The US Securities and Exchange Commission has not been favourable to spot crypto ETFs, but these recent changes hint at change. Grayscale’s previous legal win in the Bitcoin ETF case is a precedent, and the company may resort to the same if the SEC does not approve the Digital Large Cap Fund conversion quickly.

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.