- Grayscale files to convert the multi-crypto fund into spot ETF.
- Analysts warn of challenges due to the inclusion of XRP, SOL and AVAX.
On October 14, crypto asset manager Grayscale filed with the US SEC (Securities and Exchange Commission) to convert its multi-crypto fund into an ETF.
Currently the Digital Large Cap (GDLC) fund has $524 million in assets under management and spans Bitcoin [BTC], Ethereum [ETH], Solana [SOL], Ripple [XRP]And Avalanche [AVAX].
BTC and ETH dominated over 90% of the fund.
If approved, the fund will begin trading on the NYSE (New York Securities Exchange) according to the submit. In a separate one submitthe asset manager has informed its investors of the proposed rule changes for the fund.
Source: SEC
Crypto index ETF race
Converting a fund into a spot ETF makes buying and selling shares of the fund much easier. Grayscale converted two funds linked to BTC (GBTC) and ETH (ETHE) into spot ETFs this year.
However, currently only BTC and ETH are considered commodities by the SEC. In fact, other issuers have adopted the same thing crypto index ETFssuch as Hashdex and Franklin Templeton, only included BTC and ETH in their applications.
But Grayscale even included XRP, which had no clear regulations given the ongoing case with the SEC.
According to Nate Geraci of ETF Store, this move could be a bet on a change of government after the US elections in November. He declared,
“It feels like issuers are getting in on the ‘change in administration’ bet… Basically lining up in the event of a Trump win, assuming that admin would be much more crypto-friendly.”
For its part, Presto Research, a crypto-focused research firm, has viewed the filing as a potential path to altcoin ETF approval.
“Its approval could potentially pave the way for future altcoin ETFs, such as SOL, XRP and AVAX, whose prospects for ETF eligibility under the current SEC have remained unclear.”
But Prestor Research analysts also noted that the application’s road could be “bumpy,” citing Spot Challenges for SOL ETFs in August.
That said, grayscale-converted ETFs have seen intensified outflows, as seen with GBTC and ETHE. Since the conversion, GBTC has lost a total of over $20 billion in flows, while almost $3 billion in outflows have disappeared into ETHE.
It remains to be seen how the adoption will proceed after the US elections, and whether other altcoins with unclear legal status will be approved.