Grayscale Files Aave ETF as US Altcoin Race Heats Up

Key Insights

• Grayscale filed to convert its Aave trust into an ETF.
• Coinbase will act as custodian and prime broker.
• Filing followed rising US demand for altcoin exposure.

Grayscale filed a Form S-1 with the Securities and Exchange Commission on Friday to convert its trust tracking Aave into an exchange-traded fund. The asset manager said it plans to rename the product the Grayscale Aave Trust ETF and list it on NYSE Arca under the ticker GAVE. The move came as issuers expanded beyond Bitcoin and Ethereum products.

The filing placed Aave at the center of the next wave of altcoin ETF applications. Grayscale Aave Trust ETF marked the second attempt to secure US approval for a fund tied directly to the decentralized lending token. Interest in structured exposure persisted despite broader market weakness across digital assets.

ETF Filing Signals Institutional Appetite

The Securities and Exchange Commission filing showed Grayscale intends to convert its existing trust into a spot-based ETF. The company said the fund will hold AAVE tokens directly rather than use derivatives exposure. Coinbase will serve as both custodian and prime broker for the proposed product. Grayscale disclosed it plans to charge a 2.5% management fee.

The decision followed a steady expansion of crypto ETF structures across the US market. Earlier filings concentrated on large-cap assets, yet issuers increasingly targeted decentralized finance tokens. That shift occurred because institutions sought diversified exposure beyond Bitcoin and Ethereum. Aave’s inclusion reflected growing confidence in decentralized finance infrastructure.

Bitwise previously submitted an application in December for its own Aave-linked product. Its structure differed, as the filing indicated up to 60% direct token exposure and at least 40% in securities. Grayscale’s structure appeared simpler, holding the underlying token directly. The parallel filings suggested competitive positioning among asset managers.

On-Chain Metrics Frame Aave’s Market Position

DeFiLlama data showed Aave maintained over $27 billion in total value locked across multiple blockchains. That metric positioned the protocol as the largest decentralized finance lending platform globally. The scale of locked capital reflected sustained borrowing and lending demand despite broader volatility.

CoinGecko price data showed AAVE traded at $126.71 at the time of reporting. The token remained more than 80% below its May 2021 all-time high near $662. That long drawdown illustrated how decentralized finance tokens struggled to regain peak cycle valuations. Still, developers continued expanding protocol integrations.

Aave enables users to lend and borrow crypto assets across Ethereum and other chains. The AAVE token allows holders to stake for yield and participate in governance decisions. Staking mechanics reduce circulating supply, which may influence liquidity dynamics during market stress. Such token utility supported the argument for a direct-hold ETF structure.

Product Strategy Reflects Broader ETF Expansion

Grayscale structured the proposed ETF as a conversion rather than a new fund launch. That approach mirrored strategies used for previous trust-to-ETF transitions in the crypto sector. Conversions streamline regulatory review because the underlying assets already exist within a managed vehicle.

NYSE Arca served as the intended listing venue for the product. The exchange hosts numerous commodity and crypto-linked ETFs. Listing there positioned the Grayscale Aave Trust ETF alongside established digital asset funds. Market makers would handle liquidity provision upon approval.

European precedents offered context for the filing. In November, 21Shares launched an Aave exchange-traded product on Nasdaq Stockholm. Global X introduced a similar product in Germany in early 2023. Those launches demonstrated demand outside the United States for regulated Aave exposure.

The US filings suggested domestic issuers now pursued similar access structures. Asset managers appeared to anticipate regulatory openness toward diversified crypto ETF products. That posture aligned with a broader expansion of altcoin-based filings submitted in recent months.

Regulators will now review the S-1 registration statement before any listing occurs. The approval process could determine whether decentralized finance tokens gain formal ETF status in the US market. Investors will monitor developments closely as agencies evaluate custody, liquidity, and disclosure frameworks.

The next catalyst will likely come when the Securities and Exchange Commission issues its initial review timeline. Approval or delay will shape expectations for additional decentralized finance ETF filings. Market participants will assess how the Grayscale Aave Trust ETF fits into broader institutional crypto allocation strategies.

The post Grayscale Files Aave ETF as US Altcoin Race Heats Up appeared first on The Coin Republic.