Grayscale, one of the crypto sector’s most prominent asset managers, has received approval from the U.S. Securities and Exchange Commission to convert its Digital Large-Cap Fund into an exchange-traded fund.
Announced Tuesday, the move allows the product—previously structured as a trust—to trade as an ETF, providing investors with daily liquidity and tighter tracking to net asset value.
The fund concentrates exposure on the five biggest cryptocurrencies. According to Grayscale’s disclosure, about 80% of the fund’s allocation is in Bitcoin, 11% in Ether, 4.8% in XRP, 2.7% in Solana, and less than 1% in Cardano’s ADA.
By converting this trust, Grayscale further expands its lineup of exchange-traded products, reinforcing its ambitions to lead the market in regulated crypto investment vehicles.
Arbitrage Opportunities Narrow as Trusts Transition to ETFs
For years, Grayscale’s trusts traded at significant premiums or discounts to their underlying asset values, a dynamic traders exploited through arbitrage strategies.
These spreads largely resulted from the closed-end nature of the trusts, which lacked daily in-kind redemptions to align their share price with net asset value.
Grayscale’s Tuesday announcement noted the conversion will help achieve the fund’s core objective:
“To have the shares’ market price closely reflect the value of the digital assets held by the Fund, less expenses and liabilities.”
The industry once viewed Grayscale’s closed-end trusts as one of the only ways to gain institutional crypto exposure without directly holding tokens. Their transition into ETFs marks a turning point for the maturation of crypto investment products, promising more transparency and efficient price discovery.
Landmark Legal Victory Paved the Way for Grayscale’s ETF Strategy
Grayscale’s path to broader ETF conversions began with its historic courtroom clash with the SEC.
In 2022, the firm sued the agency after regulators rejected its attempt to transform the flagship Bitcoin Trust into a spot ETF. The legal fight culminated in August 2023 when a U.S. appeals court ruled the SEC’s decision “arbitrary and capricious,” effectively forcing the regulator to reconsider.
That victory paved the way for the Bitcoin Trust to relaunch as an ETF, which now carries a 1.5% expense ratio—making it the costliest, but also the most lucrative, Bitcoin investment vehicle on the market.
With the latest approval to convert its large-cap crypto fund, Grayscale continues to cement its role as a pioneer driving crypto’s integration into mainstream capital markets.
Quick Fact
- Grayscale’s Digital Large-Cap Fund holds BTC, ETH, SOL, XRP, and ADA.
- Conversion to an ETF aims to eliminate pricing gaps and improve liquidity.
- The approval follows Grayscale’s successful lawsuit over its Bitcoin ETF bid.
- Grayscale remains the largest manager of crypto investment products globally.
