Crypto asset manager Grayscale is in the process of converting its Grayscale Digital Large Cap Fund (GDLC) into an exchange-traded fund (ETF), to Bloomberg ETF expert Eric Balchunas. 

The strategic move aims to provide investors with a diversified portfolio that includes major digital assets such as Bitcoin (BTC), Ethereum (ETH), Solana (SOL), XRP and Avalanche (AVAX).

Diversified Exposure To Bitcoin, Ethereum, And More

The proposed ETF comes at a time when investor interest in regulated cryptocurrency products is on the rise. Grayscale’s Digital Large Cap Fund currently holds approximately $524 million in assets under management, with a significant focus on Bitcoin and Ethereum. 

Specifically, about 75% of the fund is allocated to Bitcoin, while Ethereum comprises roughly 19%, with the remaining investments distributed among Solana, XRP, and Avalanche. 

According to on the matter, this diversified approach is designed to offer a balanced entry point for investors seeking broader exposure to the cryptocurrency market.

The New York Stock Exchange (NYSE) had previously filed a 19b-4 application on behalf of Grayscale, seeking the Securities and Exchange Commission’s (SEC) approval to amend its rulebook to permit the listing of this new ETF. 

This filing follows a pivotal year for the market, which recently saw the approval of spot ETFs for Bitcoin and Ethereum in January and July respectively, allowing these funds to hold actual tokens rather than relying on futures contracts. 

This shift comes after years of rejections of such index funds, spurred by a court ruling in favor of Grayscale that prompted the Securities and Exchange Commission led by Gary Gensler to reconsider its stance.

Grayscale Aims For Fifth ETF Launch This Year

The successful conversion of Grayscale’s Digital Large Cap Fund into an ETF would mark the fifth launch by the firm this year, highlighting its strategy to expand its product offerings in response to increasing demand for diverse digital asset exposure. 

Balchunas noted that the ETF’s holdings, predominantly consisting of Bitcoin and Ethereum, could provide enough flexibility to accommodate smaller, less liquid assets, potentially paving the way for approval.

Over the course of the year, Grayscale’s Bitcoin and Ethereum funds have seen significant outflows, with around $20 billion and $3 billion withdrawn respectively.

In response, the firm has introduced lower-fee versions of these funds, attracting over $700 million in inflows thus far. These approvals have contributed to a surge in Bitcoin and Ethereum prices, indicating a renewed investor confidence in the cryptocurrency market.

Other asset managers are also positioning themselves to launch ETFs that include smaller tokens such as Solana, XRP and Litecoin, with recent from Canary Capital and Bitwise Invest highlighting a broader trend to integrate a wider range of cryptocurrencies into regulated investment vehicles, despite increased scrutiny from regulators in the US.

At the time of writing, the largest cryptocurrency on the market, BTC, is trading at $67,750, up a substantial 11% on a weekly basis. 

Featured image from DALL-E, chart from TradingView.com