Crypto asset manager Grayscale has filed with the United States Securities and Exchange Commission (SEC) to convert its $520 million multi-cryptocurrency fund into an exchange-traded fund (ETF).
On October 14, the New York Stock Exchange (NYSE), on Grayscale’s behalf, submitted a 19b-4 form to the SEC, requesting approval to convert Grayscale’s Digital Large Cap Fund into an ETF. This form asks the SEC to alter its rules to allow the listing of a new ETF.
Grayscale’s Digital Large Cap Fund manages over $524 million in assets. It is heavily weighted toward Bitcoin (76%), followed by Ether (18%), with the remaining allocation split between Solana, XRP, and Avalanche.
In an accompanying 8-K form, Grayscale notified its investors that the proposed changes from the NYSE would allow for the conversion to a spot ETF, making it easier for investors to buy and sell shares in the fund.
This latest filing comes after Grayscale successfully converted two major funds, the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE), into ETFs earlier this year. The SEC had previously rejected spot crypto ETF applications until an August court ruling favored Grayscale, prompting the regulator to reconsider.
Spot ETFs hold the underlying assets, unlike non-spot crypto funds, which rely on futures contracts. Spot ETFs simplify transactions for investors by removing added regulatory barriers.
Following these conversions, investors in Grayscale funds began selling their shares due to changes in the discount to net asset value (NAV). For instance, six months before the GBTC conversion, shares were trading at a 44% discount to the price of spot Bitcoin, according to YCharts. This discount disappeared after the conversion, leading to significant sell-offs.
Grayscale’s Bitcoin fund has seen $21 billion in outflows since its January conversion, while the Ethereum ETF has recorded $3 billion in outflows since July.
Additionally, on October 10, Grayscale added 35 altcoins, including Dogecoin and Worldcoin, to its list of assets “under consideration” for future investment products. The firm has also been actively launching new crypto funds, including an Aave investment fund in October, an XRP Trust in September, and an Avalanche fund in August.