Grayscale Investments has announced the launch of the Grayscale Aave Trust, which hopes to give investors direct exposure to the AAVE token, the governance token behind decentralized lending platform Aave. AAVE is currently the second largest protocol in terms of locked assets in DeFi, with $11.7 billion.

Grayscale bridges AAVE governance token investment

The Grayscale Aave Trust provides investors with access to AAVE, the governance token of the Aave decentralized lending platform. Aave is designed to enable open, transparent and decentralized lending through self-executing smart contracts, eliminating the need for traditional financial intermediaries. This structure reduces human bias, improves accessibility and differentiates itself from traditional lenders through lending without credit scores, identity verification or background checks.

Rayhaneh Sharif-Askary, Head of Product and Research at Grayscale, said: “Grayscale Aave Trust gives investors access to a protocol that has the potential to revolutionize traditional finance. By leveraging blockchain technology and smart contracts, Aave’s decentralized platform aims to optimize lending process while eliminating intermediaries and reducing reliance on human judgment.”

Open to qualified investors for subscription every day

The trust is now open for daily subscription to individual and institutional accredited investors. It operates similarly to Grayscale’s other single-asset investment trusts, focusing on investing in tokens of the Aave protocol.

To be considered an accredited investor, an individual must meet certain financial criteria, such as earning more than $200,000 per year (or $300,000 jointly with a spouse) or having a net worth of more than $1 million (excluding a primary residence). Businesses must have at least $5 million in liquid assets or ensure that all beneficial owners are accredited investors.

ETFs may be sought, but not guaranteed

Grayscale plans to seek a secondary market listing for its shares in the new product, which would provide investors with broader trading opportunities.

However, success in obtaining these listings is not guaranteed. Various regulatory considerations, including approvals from the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), may affect whether shares of new products such as Grayscale Aave Trust are able to be quoted in the secondary market. Investors should be prepared for the possibility that their shares may not be approved and that the investment may be held indefinitely.

Grayscale states that the price of its shares trading in the secondary market does not always reflect the actual value of the digital assets held by the trust, net of its fees and liabilities. Shares may sometimes trade at a premium or discount, resulting in significant differences between the market price and the value of the asset.

Understand the risks of investing in Aave and AAVE

Grayscale stated that investing in the Aave Trust carries inherent risks related to the performance and functionality of the Aave protocol and its ecosystem. Launched in 2017, the Aave protocol relies on innovative mechanisms such as aTokens, flash loans, and other peer-to-peer lending features. Any failure or problem with these components may adversely affect the value of AAVE and, therefore, investments made through the Trust.

Another major risk factor is the volatility of digital assets. The value of digital assets such as AAVE can fluctuate wildly. Such fluctuations could have a material negative impact on the value of the Trust and there is a risk that investors may lose all or a substantial portion of their investment.

Grayscale warns that investors should be aware that private securities offered through the Grayscale Aave Trust are speculative and illiquid and involve a high degree of risk. Due to these factors, investments may not be easily converted into cash and the possibility of losing the entire investment exists.

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