The U.S. Securities and Exchange Commission (SEC) has approved Grayscale’s application to convert its Digital Large Cap Fund into an exchange-traded fund (ETF), marking a pivotal development in the institutional adoption of digital assets. This decision clears the way for broader investor access to a diversified basket of leading cryptocurrencies through a regulated financial product.
The newly approved ETF will track the performance of the top five cryptocurrencies by market capitalization as defined by the CoinDesk Big 5 Index. These include Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Ripple (XRP), and Cardano (ADA). The approval came just one day before the SEC’s final ruling deadline—a significant shift from past rejections that occurred at the last minute.
This milestone underscores growing regulatory acceptance of crypto-based financial instruments and sets a precedent for future ETF conversions. Market analysts view this as a signal that the SEC is becoming more comfortable with crypto ETFs, especially those dominated by established assets like BTC and ETH.
Portfolio Composition: Bitcoin and Ethereum Take Center Stage
The Grayscale Digital Large Cap Fund is heavily weighted toward the two largest cryptocurrencies, reinforcing investor confidence in their stability and long-term value.
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Bitcoin accounts for approximately 80.2% of the fund’s holdings, reflecting its status as the cornerstone of most institutional crypto portfolios. Ethereum follows with a 11.3% allocation, making it the largest altcoin position in the fund. Together, BTC and ETH represent over 91% of total assets, which may have influenced the SEC’s favorable decision due to their relatively mature market structures and extensive track records.
The remaining allocations include:
- XRP: 4.8%
- SOL: 2.7%
- ADA: 0.81%
This strategic weighting ensures exposure to high-potential altcoins while maintaining risk discipline through concentration in market leaders. The inclusion of XRP is particularly noteworthy, given its ongoing legal history with the SEC—its presence in an approved ETF signals increasing regulatory clarity around certain previously contested tokens.
Why This Approval Was Expected
According to Bloomberg ETF analyst James Seyffart, the approval was largely anticipated. In a post on X (formerly Twitter) on July 1, 2025, Seyffart stated:
“Approval was our base case. The fund is over 90% Bitcoin and Ethereum. The next key date is @Bitwise’s $BITW deadline on July 31—but the SEC could act earlier…”
This sentiment reflects industry consensus: funds with heavy exposure to Bitcoin and Ethereum face a lower regulatory hurdle compared to pure altcoin ETFs. The SEC has yet to approve any ETF focused solely on alternative cryptocurrencies like Solana or Dogecoin, highlighting a cautious but progressive approach.
What’s Next? Bitwise Awaits Decision on $BITW Conversion
With Grayscale’s success, attention now turns to Bitwise, another major player in the crypto asset management space. The firm is awaiting SEC approval to convert its Bitwise 10 Crypto Index Fund (BITW) into an ETF.
Currently, BITW holds:
- 79% Bitcoin
- The remainder distributed across ETH, XRP, SOL, ADA, Sui (SUI), Chainlink (LINK), Avalanche (AVAX), Litecoin (LTC), and Polkadot (DOT)
While similar in structure to Grayscale’s fund, BITW includes a broader range of mid-cap cryptocurrencies. Its outcome could indicate whether the SEC is ready to embrace slightly more diversified models—or if stricter limits remain for non-BTC/ETH exposure.
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A New Wave of Crypto ETF Applications Expected in Late 2025
Grayscale’s approval is likely to trigger a surge in new ETF filings targeting smaller-cap digital assets. Industry experts predict a wave of applications for ETFs based on Tron (TRX), Dogecoin (DOGE), SUI, AVAX, and LTC in the second half of 2025.
James Seyffart and fellow Bloomberg analyst Eric Balchunas noted in a June 30 social media post that they expect “a new wave of ETFs” later this year. However, they also caution that altcoin-specific ETFs still face significant regulatory scrutiny.
To date, the SEC has not approved any standalone altcoin ETFs. This creates both opportunity and uncertainty for asset managers aiming to bring niche digital assets into mainstream markets.
Key FAQs About Grayscale’s New ETF
Q: What cryptocurrencies are included in the Grayscale ETF?
A: The ETF includes Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Ripple (XRP), and Cardano (ADA)—the top five assets by market cap in the CoinDesk Big 5 Index.
Q: Why did the SEC approve this fund when others were rejected?
A: The fund's heavy weighting in Bitcoin and Ethereum—over 90% combined—likely made it less risky from a regulatory standpoint, aligning with previous approvals of spot Bitcoin ETFs.
Q: Can I invest directly in this ETF now?
A: Once officially launched on major exchanges, retail and institutional investors will be able to buy shares through standard brokerage accounts.
Q: Does this mean altcoin ETFs will be approved soon?
A: Not necessarily. While this sets a positive precedent, pure altcoin ETFs face higher regulatory barriers due to concerns about liquidity, market manipulation, and valuation transparency.
Q: How does this affect the broader crypto market?
A: Increased institutional access via ETFs boosts legitimacy, improves liquidity, and may drive long-term price appreciation across supported assets.
Q: Is XRP’s inclusion a sign of full regulatory clearance?
A: While not a formal endorsement, its inclusion suggests evolving regulatory comfort with XRP following Ripple’s partial legal victory in prior litigation.
Final Thoughts: A Stepping Stone Toward Mainstream Adoption
Grayscale’s ETF conversion approval represents more than a single product launch—it’s a signal of deepening integration between traditional finance and the digital asset ecosystem. As investor demand grows and regulatory frameworks mature, we can expect further innovation in crypto-linked financial products.
With Bitwise’s decision looming and new filings expected later in 2025, the momentum behind crypto ETFs shows no signs of slowing down. For investors, this means greater choice, improved transparency, and easier access to diversified crypto exposure—all within regulated markets.
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