Grayscale’s Bid to Launch Multi-Crypto ETF—Why Bitcoin and Ether Liquidity May Seal the Deal

• The transition by Grayscale to transform its digital large-cap fund into the multi-asset ETF that includes Bitcoin, Ether, Solana, and XRP represents the next major development of crypto investment products.
• It could also work in favor of the company when it comes to approval from the SEC, given the latter’s past trend of embracing highly liquid assets.
• Despite this, market sentiment has already signaled a change to this by buying into products such as Grayscale where the discount on its funds has already started to narrow.

Grayscale’s latest action in the crypto market is news as the company aims to launch a new multi-asset ETF.It was only in February that Grayscale unveiled its new crypto product: the Bitcoin Futures ETF. The proposed ETF would supposedly consist of spot Bitcoin, Ether, Solana, and XRP, which could be transformative in this market for cryptocurrencies. This potential offering would be created through the conversion of GDLC’s existing holding that is the Digital Large Cap Fund: It contained a basket of the largest coins.

Grayscale is looking to put out the first ETF that will hold spot bitcoin, ether, solana and XRP by converting GDLC. Is this poss? Maybe. Bc btc and ether make up over 90% of holdings (see below) and there’s wiggle room for ETF to have small portion of illiquid assets it may well… https://t.co/g7E2hN0tVZ pic.twitter.com/SKzs7shFQF

— Eric Balchunas (@EricBalchunas) October 16, 2024

Potential Approval for Grayscale’s Crypto ETF

Grayscale’s GDLC has over 90% of its assets invested in BeTCP and Ether, the two most sought-after and liquid coins in the market. This focus on higher liquidity assets may improve its likelihood of having the ETF conversion sanctioned by the U.S. Securities and Exchange Commission (SEC). The SEC has always been more cautious with products that invest in less liquid securities, with some shades of flexibility to allow ETFs investing in certain portions of illiquid securities.

A Possible Leap in the ETF Race and Investor Sentiment

If Grayscale is able to convert its GDLC to an ETF that invests in Bitcoin, Ether, Solana and XRP, then it becomes a formidable player. The competition in the ETF market increases constantly, and at the moment a number of companies are trying to launch the first multi-asset crypto ETF. Should the Grayscale approval happen, the company could outrun other firms into offering the first combined crypto ETF that includes a basket of digital currencies.

Market has reacted to this news and as evidenced by the decline in the discount on Grayscale’s funds. It is very clear for some investors to think that this ETF conversion could get approval hence slightly encouraging the discount to fall. Still, the future of the proposed ETF is quite unpredictable since digital assets themselves have rather ambiguous legal status at the moment.

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