Grayscale applies to convert large crypto asset funds into ETFs

According to foreign media reports (The Wall Street Journal), Grayscale Investments recently submitted an application to the U.S. Securities and Exchange Commission (SEC), planning to convert its existing Grayscale Digital Large Cap Fund (GDLC) into Exchange Traded Funds (ETFs). The fund currently contains five major cryptocurrencies including Bitcoin ($BTC), Ethereum ($ETH), Solana ($SOL), Ripple ($XRP), and Avalanche ($AVAX).

According to Grayscale’s official website, this initiative aims to further expand the accessibility of crypto assets and meet investors’ needs for diversified crypto asset investments. The fund currently trades on the OTC market under the symbol GDLC and has approximately $524 million in assets under management. Of these, Bitcoin accounts for 75%, Ethereum about 18%, and $SOL, $XRP, and $AVAX make up the rest.

Image source: Grayscale GDLC representation and composition

Grayscale has previously successfully converted its Bitcoin Trust (GBTC) and Ethereum Trust (ETHE) into spot ETFs, and this application will be the company’s fifth ETF launch this year. “This application reflects Grayscale’s unwavering commitment to making the crypto asset class more accessible to all investors,” a Grayscale spokesperson said in a statement.

ETF application boom brings new opportunities to the crypto market

The SEC approved spot ETFs for Bitcoin and Ethereum earlier this year, signaling a major shift in regulatory attitudes and ending a long-standing rejection of such funds. The change follows a court ruling in Grayscale's favor, forcing the regulator to reconsider its stance. The approval triggered a surge in the prices of Bitcoin and Ethereum, and prompted asset managers to apply to launch ETFs tracking smaller and riskier tokens such as Solana, Ripple ($XRP) and Litecoin ($LTC).

However, it is worth noting that the SEC has repeatedly alleged that Solana is an unregistered security and has filed lawsuits against multiple crypto companies. Therefore, Grayscale’s application may face regulatory challenges. Nonetheless, the company’s move reflects its strategy of diversifying its product portfolio to meet investor demand for a wider range of crypto assets.

Grayscale's GDLC fund will move from the OTC market to trading on the New York Stock Exchange (NYSE) once it is approved to convert to an ETF. Once approved, investors will be able to more easily purchase the ETF through a brokerage account, gaining investment exposure to major cryptocurrencies.

Investor reaction and future prospects

Although Grayscale’s Bitcoin and Ethereum ETFs were successfully launched in January and April this year, according to data from Farside Investors, GBTC and ETHE have lost more than $23 billion in funds since their launch, showing that investors are losing money from this. Two funds withdrew capital.

Source: Farside Investors Bitcoin and Ethereum ETF inflow and outflow records

Grayscale’s application to convert GDLC into an ETF may be to rekindle investor interest and provide more attractive investment products. However, the uncertainty of the regulatory environment and the market’s risk assessment of smaller tokens will be important factors in the success of this application.

Regardless, Grayscale’s actions demonstrate the continued evolution of the crypto-asset market, with the launch of ETFs and the boom in applications bringing new opportunities and challenges to investors. In the future, as regulatory policies are further clarified, more crypto assets are expected to enter mainstream investment channels.

Further reading
Get ready to enter the DeFi market! Grayscale launches Aave fund, why are you optimistic about it?
Is Sui the next Solana? Grayscale reveals 3 major advantages: The competitiveness is really strong!
Is there meat to eat with the organization? Grayscale: "These 20 coins" have the most explosive potential and have been added to the investment list

[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.