On Tuesday, asset management company Grayscale received approval from the U.S. Securities and Exchange Commission (SEC) to convert its digital large-cap cryptocurrency fund into an exchange-traded fund (ETF).
The fund primarily tracks the CoinDesk Five Index, investing in the top five cryptocurrencies by market capitalization.
In the fund's asset allocation, Bitcoin (BTC) accounts for approximately 80.2%, Ethereum (ETH) for 11.3%, Solana (SOL) for about 2.7%, Ripple (XRP) for over 4.8%, and Cardano's ADA (ADA) for 0.81%.
For a long time, investors have relied on arbitrage opportunities from the premium or discount of Grayscale's crypto trusts, mainly profiting from the price differences compared to the net asset value (NAV, which is the total assets of the fund minus liabilities).
These arbitrage opportunities mainly arise from the lock-up period of Grayscale's crypto trust products and the lack of a physical redemption mechanism. However, as Grayscale gradually transitions its private digital asset trusts into ETFs, such arbitrage space has been continuously narrowing. In a statement released on Tuesday, Grayscale said:
As a pioneer in crypto asset investment tools, Grayscale provides investors with solutions to gain exposure to digital assets without directly holding them. The transformation of its crypto trust products into ETFs marks a step towards industry maturity and signals the end of an era.
In June 2022, after the SEC rejected its application, Grayscale filed a lawsuit in court to fight for the right to convert its Bitcoin trust into an ETF.
After about a year of legal proceedings, in August 2023, a U.S. judge ruled that the SEC's previous rejection of the conversion application was "arbitrary and capricious," ultimately supporting Grayscale's request.
Currently, Grayscale's Bitcoin trust is listed and traded as an ETF, with an expense ratio of 1.5%, making it the highest management fee and most profitable Bitcoin ETF investment tool in the current market.
Related: U.S. regulators consider simplifying the listing process for cryptocurrency ETFs
Original article: “SEC Approves Grayscale Large-Cap Crypto Fund Conversion to ETF”
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