We’re excited to report that the Securities and Exchange Commission (SEC) just approved a very big change. Grayscale’s Digital Large Cap Fund (GDLC) will now function as an exchange-traded fund (ETF). Such approval would mark a tipping point in the cryptocurrency investment landscape. Perhaps more significantly, it could pave the way for much broader acceptance of crypto ETFs in the United States. The move is especially impressive considering the fund’s multi-asset nature, a configuration that is unprecedented in the US market.

Meanwhile, Grayscale’s GDLC is now the first crypto ETF approved. This milestone is even more notable given the changing political landscape that appears to be developing in favor of cryptocurrencies. The regulatory filing formalizing the change is amendment SR-NYSEARCA-2024-87.

GDLC's Unique Composition

Unlike many of its competitors, the Grayscale Digital Large Cap Fund truly stands out with its diversified holdings. Bitcoin makes up almost 80% of the fund’s portfolio, with Ethereum making up about 11%.

Solana (SOL), Cardano (ADA), and XRP make up less than 10% of the portfolio combined. This combination provides investors with exposure to these high-growth potential altcoins, all the while maintaining a safe underbelly with the two largest cryptocurrencies. Grayscale has provided only limited information regarding GDLC’s asset weightings, including publicly available quarterly disclosures.

The unique strategy blends proven cryptocurrencies like Bitcoin and Ether with exciting new altcoins. This exclusive approach to the crypto space has drawn in institutional-grade investors hungry for diversification and exposure to the booming crypto market. This arrangement establishes a favorable regulatory foreshadowing, likely shaping later decisions on crypto ETFs.

Implications for Crypto ETFs

With the SEC’s approval, the conversion of GDLC is now approved. Depending on the ruling, this decision could have far-reaching repercussions on the future of crypto ETFs in the US. Right now, the market is mostly limited to ETFs that focus exclusively on Bitcoin and Ethereum.

The approval of GDLC, a multi-asset fund, broadens the types of investable products. This development might open the door to more diversification in the emerging crypto ETF market. Industry specialists, including CoinDesk’s own expert Adam White, have said that today’s approval sets a precedent for the introduction of ETFs based on individual altcoins.

"could then be followed by approval of individual ETFs for XRP, SOL, ADA, etc." - Nate Geraci

According to Nate Geraci, the approval serves as a "real-world test for other crypto assets encapsulated within an ETF format."

Impact on Altcoin Market

The approval of Grayscale Digital Large Cap Fund (GDLC) could be followed by approval of individual ETFs for XRP, SOL, ADA, etc. The $1.6 million allocation to altcoins within GDLC is a strong indicator of the fund’s prioritization around more established cryptocurrencies.

"XRP, SOL, and ADA together represent less than 10 % of GDLC’s assets" - Nate Geraci

While the actual amount of these altcoins in a regulated ETF structure would be small, it would significantly heighten their visibility and legitimacy. This expanded exposure could serve as a magnet, drawing deeper pools of investors. If true, this would be a great sign for the altcoin market. That means traditional financial systems are more accessible to these digital assets than ever, and it’s a really exciting time.