On the 11th of September, Grayscale filed an amendment that could move its Litecoin Trust closer to an ETF structure. The filing proposes renaming the trust Grayscale Litecoin Trust ETF while keeping the LTCN ticker.
If approved, the change will increase ease of use for investors seeking exposure to Litecoin [LTC] via a national exchange. More importantly, the adoption of the ETF structure by LTCN will provide the opportunity to create new shares and redeem existing ones in baskets.
By doing so, this could reduce price gaps between LTCN and the value of its Litecoin holdings, resulting in improved liquidity. Meanwhile, as of the 30th of June, the trust assets stood at $82.3 million and 1.97 million Litecoin.
Moreover, it also had 24.25 million shares outstanding, showing an established investor base.
Therefore, this submission represents a movement toward a more streamlined and liquid investment structure for LTCN. However, approval from regulators and listing on the NYSE Arca are still required before the conversion can occur.
If cleared, this may represent an increase in accessibility to investors regarding their ability to invest in Litecoin.
The proposed NYSE Arca move could change how investors trade LTCN after its long OTC history. Historically, LTCN’s stock traded significantly away from its underlying value. At one point it reached a premium of 5,893%.
Still, at another point in its trading history, LTCN was discounted by 67%.
Therefore, a national exchange and share creation or redemption could help to reduce the historical differences between the current price of LTCN and its underlying value. That would make LTCN easier to trade and improve price accuracy.
Meanwhile, Litecoin already provides a regulated investment opportunity for all investors to gain exposure to LTC via Canary’s product, LTCC. However, because of the relatively small size of the LTCC product line, there appears to be limited interest from investors.
LTCN will enter with about $82 million in assets and 24 million shares, which should provide a stronger base than current Litecoin ETFs. But this listing will not expand the Litecoin ETF market unless it attracts new capital.
All in all, rising flows and institutional ownership would confirm the demand is new, while weak flows would suggest that the move only improves liquidity for existing holders