The first Chainlink ETF in the United States is here! Grayscale launched staking yield support this week.

According to Nate Geraci, co-founder of the ETF Institute, the cryptocurrency asset management company Grayscale will launch the first Spot Chainlink exchange-traded fund in the United States this week. Grayscale will upgrade its Chainlink private sale trust to an ETF, and the product will track the Spot price of LINK as well as the earnings generated from staking LINK.

Successful replication of grayscale trust conversion model

(Source: SEC)

Grayscale will be able to upgrade the Chainlink private sale trust to an ETF. This trust conversion model is Grayscale's unique advantage and is key to its ability to quickly launch multiple products in the cryptocurrency ETF market. The Grayscale Chainlink Trust is the product of the company's LINK trust fund converting into an ETF five years after its establishment at the end of 2020, which means that the product has been operating for nearly five years, accumulating rich asset management experience and a solid investor base.

The advantage of converting a trust into an ETF lies in the ability to skip the lengthy process of building a product from scratch. The trust stage has already completed asset accumulation, custody arrangements, and the establishment of operational processes; the conversion to an ETF is primarily a change in regulatory form. This model allows Grayscale to quickly convert its multiple private sale trusts into publicly traded ETFs after the SEC's policy environment improves, seizing market opportunities.

Like several other ETFs from the company, this conversion strategy has been successfully applied to the XRP and DOGE ETFs. Last month, Grayscale also launched Spot XRP and DOGE ETFs, both products converted from private sale trusts. This continuous launch pace shows that Grayscale is batch converting its private sale product line, quickly expanding its ETF product matrix by leveraging the current favorable regulatory environment.

When Grayscale established the Chainlink Trust at the end of 2020, the regulatory environment for cryptocurrency ETFs in the United States was still extremely strict, with the SEC rejecting almost all spot cryptocurrency ETF applications. In that environment, private sale trusts were one of the few compliant channels for institutional investors to gain exposure to encryption assets. Grayscale's forward-looking layout positioned it favorably in the ETF wave five years later.

Innovative product design enhanced by staking rewards

The product will generate returns by tracking the Spot price of LINK and the earnings obtained from staking LINK. This design fundamentally differentiates the Chainlink ETF from other ETFs that simply track the Spot price, providing investors with an additional source of returns. Chainlink's staking mechanism allows LINK holders to stake their tokens into the network to support the security and reliability of the oracle services, and in return, stakers can receive staking rewards.

Staking yields are highly attractive in the current low interest rate environment. Although traditional bond yields have risen, they remain relatively low, while Chainlink's staking yield could reach single digits or even higher annual returns. For institutional investors seeking yield, this additional layer of returns makes Chainlink ETF more appealing than simply holding LINK Spot.

However, staking also introduces additional risks and complexities. The LINK that is staked usually has a lock-up period during which it cannot be freely traded. If the price of LINK drops significantly, the staked tokens cannot be sold immediately to stop losses. Additionally, staking involves smart contract risks; although Chainlink has a good security record, there remains the theoretical possibility of smart contract vulnerabilities or attacks. Grayscale, as the ETF manager, needs to manage these risks and ensure the interests of investors.

Grayscale has always been optimistic about the Chainlink ecosystem, and in a recent research report, it referred to it as the “key connective organization” between cryptocurrency and traditional finance. This positioning is extremely accurate. Chainlink, as a decentralized oracle network, provides real-world data inputs for smart contracts. This functionality is applied in various fields such as DeFi, insurance, and gaming, making Chainlink an important component of blockchain infrastructure.

Three Key Reasons Why Chainlink is the “Key Connectivity Organization”

Oracle Infrastructure: Provides price data for thousands of DeFi protocols, supporting hundreds of billions of dollars in locked value.

Cross-Chain Interoperability: The Chainlink CCIP protocol supports secure communication and asset transfer between different blockchains.

Traditional Financial Bridge: Traditional financial institutions such as SWIFT are testing integration with Chainlink to promote the on-chain aspect of TradFi.

Bitwise Competition and Expectations for 100 ETF Waves

At the same time, competitor Bitwise, a cryptocurrency asset management company, is also gearing up for another LINK ETF. The simultaneous launch of similar products by these two giants is becoming increasingly common in the cryptocurrency ETF market. Grayscale and Bitwise are both leading companies in the cryptocurrency asset management field, creating healthy competition in product innovation and market expansion.

Although Bitwise's Chainlink ETF has not yet announced a specific launch date, according to Geraci, it is also in the “waiting to launch” phase. The consecutive launch of two LINK ETFs will provide investors with options and increase market liquidity. Experience from the launch of Bitcoin Spot ETFs shows that competition among multiple issuers will drive down fee rates, ultimately benefiting investors.

According to Bloomberg's senior ETF analyst Eric Balchunas, Geraci's forecast aligns with Bloomberg's estimates, which predict that Grayscale's product will launch on December 2. Last week, Balchunas predicted that more than 100 cryptocurrency ETFs would steadily launch within the next six months. “In the next 6 days, there will be 5 Spot cryptocurrency ETFs launched. Besides that, we currently do not have exact numbers, but we expect a steady supply (possibly exceeding 100 in the next six months),” Balchunas pointed out on X on November 24.

The forecast of 100 ETFs shows that the cryptocurrency ETF market is entering a phase of explosive growth. The leadership change at the U.S. Securities and Exchange Commission has opened the door for cryptocurrency ETFs in the U.S., with ETFs linked to assets such as Solana, XRP, and Dogecoin all being approved this year. The improvement of this regulatory environment is the fundamental reason for the explosion of ETFs.

Expectations for the Explosion of the Crypto ETF Market in the Next 6 Months

Surge in Quantity: More than 100 cryptocurrency ETFs are expected to be launched within the next 6 months.

Asset Diversification: Expanding from BTC and ETH to various assets such as XRP, DOGE, LINK, and SOL.

Product Innovation: In addition to Spot ETF, there are also leveraged ETF, stake ETF, theme combination ETF, and other innovative products.

Publishers Increase: In addition to Grayscale and Bitwise, more traditional asset management companies will enter the market.

SEC Leadership Change Opens a New Era for Crypto ETF

This year's leadership change at the U.S. Securities and Exchange Commission has opened the door for cryptocurrency ETFs in the United States. After Trump returned to the White House, cryptocurrency skeptic and SEC Chairman Gary Gensler resigned, replaced by cryptocurrency advocate Paul Atkins. This change in leadership has led to a 180-degree shift in the SEC's regulatory stance on cryptocurrency.

Under Gensler's leadership, the SEC has taken a very strict regulatory stance on cryptocurrencies, rejecting almost all spot cryptocurrency ETF applications and only approving Bitcoin and Ethereum futures ETFs. Gensler believes that most cryptocurrencies are unregistered securities and that there are risks of market manipulation at cryptocurrency exchanges, making them unsuitable for launching ETFs. This stance has caused the United States to fall behind regions such as Europe and Canada in the development of cryptocurrency ETFs.

The new SEC Chairman Atkins has a completely different stance. He has long supported financial innovation and market liberalization, believing that a clear regulatory framework can better protect investors than a one-size-fits-all ban. Under his leadership, the SEC has begun to approve more types of cryptocurrency ETFs, including Solana, XRP, and Dogecoin. This policy shift has opened the floodgates for the entire cryptocurrency ETF market.

The approval of the Chainlink ETF is a direct result of the improvement in this regulatory environment. During the Gensler era, it was nearly impossible for non-Bitcoin and non-Ethereum assets like Chainlink to obtain ETF approval. However, under Atkins' leadership, the SEC has adopted a more open attitude, willing to evaluate the individual characteristics of different encryption assets instead of rejecting them outright.

Last month, Grayscale also launched Spot XRP and DOGE ETF, demonstrating its aggressive expansion strategy in the new regulatory environment. From Bitcoin ETF to Ethereum ETF, and then to XRP, DOGE, LINK ETF, Grayscale is rapidly establishing a product line that covers various encryption assets. This diversification strategy not only disperses risk but also provides choices for investors with different preferences.