Grayscale Adds XRP to its GDLC Fund, is XRP ETF Next?

Grayscale has re-added XRP to the Digital Large Cap Fund, one of its largest investment products by AUM, sparking anticipation of a possible XRP ETF product in the near future.

The digital asset investment firm disclosed this in a press release last night. Notably, the announcement detailed a quarterly rebalancing of some of Grayscale’s investment products, including the Grayscale DeFi Fund, the Grayscale Digital Large Cap Fund, and the Grayscale Smart Contract Platform Ex-Ethereum Fund.

The Grayscale Digital Large Cap Fund, which aims to give investors exposure to some of the largest crypto assets by market capitalization, contained Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Polygon (MATIC), Cardano (ADA) and Avalanche (AVAX).

However, the company disclosed in the latest announcement that they had sold off some components to procure more Avalanche tokens and XRP tokens as part of the quarterly rebalancing move. Subsequently, they have re-added XRP to the fund, replacing MATIC.

As a result, XRP now commands 2.54% of the entire market cap of the fund, only below Bitcoin (69.15%), Ethereum (21.90%), and Solana (3.65%).

The GDLC Fund is the third largest investment product from Grayscale, commanding a whopping $378.4 million in assets under management.

Grayscale Previously Removed XRP

Recall that Grayscale already had XRP in the fund before the SEC’s lawsuit against Ripple and its executives.

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Nonetheless, after the regulatory agency charged Ripple for allegedly engaging in unregistered securities offerings, XRP witnessed intense selloffs that saw its market cap drop.

In response, Grayscale removed XRP from the fund on Jan. 4, 2021, amid the legal battle. The firm sold off its XRP shares and leveraged the proceeds to procure other assets in the fund.

However, following the pivotal ruling in July 2023 that declared XRP a non-security, calls have intensified for Grayscale to reintroduce the asset.

It bears mentioning that these calls emerged as major U.S.-based exchanges such as Coinbase and Kraken relisted XRP. In its recent announcement, Grayscale affirmed that the ruling helped XRP meet the criteria for inclusion in the GDLC Fund. 

Possible XRP ETF?

The recent development has triggered elation among XRP proponents, with some individuals now looking to welcome a spot XRP ETF.

Notably, while leading asset managers have turned their eyes to Bitcoin and Ethereum for spot ETFs, XRP has been largely ignored despite being the only altcoin with legal clarity in the U.S.

Industry commentators have questioned why asset management firms such as BlackRock have not pushed to launch a spot XRP ETF.

News of a fake BlackRock iShares XRP ETF surfaced last November, leading to a spike in XRP price. However, the token dropped in value when the product was found to be fake.

Grayscale had previously sponsored a crypto watch display on CNBC involving the prices of BTC and ETH along with XRP. This further raised speculation of a looming XRP ETF. 

Recall that Grayscale also liquidated its XRP Trust in January 2021 on the back of the SEC’s lawsuit. Now that the investment firm has reintroduced the crypto asset to the GDLC Fund, market watchers anticipate the introduction of an XRP ETF. However, the firm has not hinted at such a product as of press time.