Grayscale Files Application to Transform Aave Trust Product Into NYSE Arca ETF
Following Bitwise's lead, Grayscale has submitted regulatory filings to introduce a dedicated Aave investment vehicle in the United States, wagering on continued Wall Street interest in alternative cryptocurrency assets.
Digital asset management firm Grayscale has submitted an application seeking regulatory clearance to transform its existing investment trust that tracks the native token of decentralized lending platform Aave into an exchange-traded fund (ETF) product.
On Friday, the firm submitted a Form S-1 registration document to the Securities and Exchange Commission, indicating its plans to transform the existing trust structure and rebrand it as the Grayscale Aave Trust ETF.
The filing from Grayscale represents one among several ETF applications seeking exposure to alternative cryptocurrencies, indicating that institutional investors on Wall Street continue to maintain interest in cryptocurrency investment opportunities despite ongoing challenges in the broader market.
According to data from DefiLlama, Aave stands as the leading decentralized finance protocol by size, boasting more than $27 billion in total value locked within its ecosystem. The protocol enables participants to engage in lending and borrowing activities involving cryptocurrencies across various blockchain networks, while holders of the AAVE token have the ability to stake their holdings to generate yields.
Grayscale joins Bitwise in Aave ETF race
Through this regulatory submission, Grayscale becomes the second firm pursuing approval from United States regulators for an exchange-traded fund connected to Aave (AAVE), now standing alongside only Bitwise in the effort to bring such a product to market.
In December, Bitwise submitted documentation to the SEC proposing the launch of the Bitwise AAVE Strategy ETF, which was part of a broader wave of applications aiming to establish ETFs linked to widely-traded altcoins, including Uniswap (UNI) and Zcash (ZEC).
The strategy outlined in Bitwise's ETF involves allocating as much as 60% of fund assets into direct holdings of AAVE tokens, with a minimum of 40% invested in securities such as other ETFs that provide exposure to AAVE, whereas Grayscale's proposed structure would involve direct ownership of AAVE tokens exclusively.
These two exchange-traded funds are positioned to become the first offerings in the United States providing standalone exposure to Aave, adding to a limited selection of international investment products that have been introduced to provide access to the token.
Within the European market, 21Shares introduced an Aave exchange-traded product listed on the Nasdaq Stockholm in November, following by several years Global X's launch of a comparable Aave investment product in Germany during early 2023.
Based on data from CoinGecko, the AAVE token has experienced a decline of 1.6% in value during the past 24-hour period to reach $126, representing a drop of more than 80% from its historical peak of nearly $662, a price level achieved in May 2021 during a period of strong market performance for alternative cryptocurrencies.