The first U.S. cryptocurrency index exchange-traded fund (ETF) has officially commenced trading, marking a significant milestone in the evolution of crypto investments. Grayscale CEO Peter Mintzberg expressed optimism about this development, proclaiming it as the dawn of an era for crypto index investing during an interview with CNBC.
The Grayscale Digital Large Cap Fund (NYSE: GDLC), also referred to as the Grayscale CoinDesk Crypto 5 ETF, allows investors to gain exposure to the five largest and most liquid cryptocurrencies, as defined by the CoinDesk 5 Index. According to Grayscale, Bitcoin dominates the fund’s composition, making up 72.43%, followed by Ethereum at 16.95%. Additional allocations are distributed among XRP (5.6%), Solana (4.01%), and Cardano (1.02%), with the fund reportedly covering around 90% of the total cryptocurrency market capitalization.
To maintain its alignment with the CoinDesk 5 Index, Grayscale has committed to executing quarterly rebalancing of the fund. On its inaugural trading day, the GDLC recorded a substantial trading volume of $22 million, signaling strong market interest from analysts who see considerable potential in cryptocurrency index funds. Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, remarked on the fund’s promising start.
The launch of GDLC follows its evolution from a private over-the-counter fund to an ETF, enabled by the recent approvals from the Securities and Exchange Commission (SEC). Although the SEC first greenlit the ETF conversion in July, it initially delayed the decision until last week. This approval aligns with the SEC’s introduction of new generic listing standards for cryptocurrency ETFs, a move that investment experts believe could lead to a surge of launches in the near future.
Matt Hougan, a chief investment officer at Bitwise, suggested that these fresh standards would streamline the filing process and make approvals faster, potentially paving the way for over 100 cryptocurrency ETFs to be introduced within the following year. In addition to GDLC, last week also saw the launch of funds focused on popular cryptocurrencies like Dogecoin and XRP.
Grayscale’s pioneering move into the index cryptocurrency ETF landscape is noteworthy, particularly given the firm’s instrumental role in advocating for spot cryptocurrency ETFs. A significant legal victory against the SEC earlier in 2023 is acknowledged as one of the major catalysts for the subsequent approval of spot Bitcoin ETFs, which were announced in January 2024. The SEC had previously rejected Grayscale’s request to convert its over-the-counter Bitcoin trust into a spot ETF, having allowed futures-based funds, leading to a legal challenge that the company successfully pursued.
The ruling in Grayscale’s favor pointed out inconsistencies in the SEC’s decisions, contributing to the approval of more accessible investment options in the cryptocurrency space. Nate Geraci, president of NovaDius Wealth Management, praised Grayscale for their pivotal role in shaping the SEC’s new generic listing standards and acknowledged their commitment to advocating for the industry.
As the cryptocurrency market continues to evolve, the launch of GDLC represents a significant step forward, potentially opening doors for investors looking for diversified exposure to top digital assets.
