Grayscale has filed to convert its Aave trust into an exchange-traded fund, signaling renewed institutional interest in altcoins. The crypto asset manager submitted a Form S-1 registration statement with the U.S. Securities and Exchange Commission on Friday, seeking approval to rename the product the Grayscale Aave Trust ETF.
The firm plans to list the ETF on NYSE Arca under the ticker “GAVE.” Grayscale will charge a 2.5% sponsor fee based on net asset value, payable in AAVE tokens. Coinbase will act as custodian and prime broker for the proposed fund.
The filing reflects growing competition in altcoin investment products. Grayscale now aims to offer direct exposure to Aave, the leading decentralized lending protocol.
This push comes despite broader market volatility. Investors have cooled toward speculative tokens in recent months. However, Grayscale’s filing suggests Wall Street still sees long-term value in DeFi exposure.
Aave’s DeFi Dominance Drives Interest
Aave ranks as the largest decentralized lending protocol by total value locked. According to data from DefiLlama, the platform holds more than $27 billion across multiple blockchains. Users lend and borrow digital assets while earning yield, and the AAVE token supports staking and governance.
The token currently trades near $126, well below its all-time high of nearly $662 reached in May 2021. Despite the steep drawdown, asset managers continue betting on its long-term utility. Grayscale’s proposal would hold AAVE tokens directly rather than using derivative exposure. That structure mirrors its earlier trust-to-ETF conversions, including its landmark Bitcoin trust case that opened the door for spot crypto ETFs in the United States.
Bitwise Already in the Race
Grayscale joins Bitwise in seeking regulatory approval for a standalone Aave ETF. Bitwise filed paperwork in December for its AAVE Strategy ETF, alongside proposals tied to Uniswap and Zcash.
Bitwise’s structure differs slightly. It’s proposed fund plans to hold up to 60% of assets directly in AAVE tokens and at least 40% in securities, including ETFs with Aave exposure. Grayscale, in contrast, intends to maintain direct token holdings.
The race reflects broader institutional appetite for structured crypto products. The SEC has yet to approve a U.S.-listed Aave ETF, but overseas markets already host similar offerings. In Europe, 21Shares and Global X launched Aave exchange-traded products, offering regulated exposure to investors.
If approved, Grayscale’s ETF would mark one of the first U.S. vehicles providing direct Aave exposure through traditional brokerage accounts.
Market Implications and Investor Outlook
Altcoin ETFs expand access for institutional and retail investors who prefer regulated products over direct token custody. An approved Aave ETF could deepen liquidity and enhance price discovery.
However, regulatory uncertainty remains a key variable. The SEC continues reviewing multiple crypto ETF applications. Approval could signal greater acceptance of DeFi-linked assets within U.S. markets.
For now, Grayscale’s filing underscores one clear trend: institutional players continue building infrastructure around decentralized finance, even during market downturns.
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