Grayscale files for a 2x Zcash ETF built on options on its two-week-old ETP

Fifteen days after it listed a spot Zcash product on NYSE Arca, Grayscale Funds Trust asked the SEC to register a fund that would try to double ZEC’s daily move without holding the coin. The proposed series, The 2x Zcash ETF, would get that exposure primarily through exchange-listed options on The Zcash ETF, ZCSH, and through Zcash futures. Listed 2x bitcoin and Solana funds build the same daily objective in futures. Grayscale said those options began trading on NYSE Arca on Tuesday, September 8, the day before this filing.

The document, filed Wednesday, September 9, is post-effective amendment No. 104 under the Securities Act of 1933 and amendment No. 112 under the Investment Company Act of 1940. The prospectus is marked “Subject to Completion.” It does not name a ticker, a listing venue, a management fee, or a trading date. The paper proposes that the registration become effective 75 days after filing under Rule 485(a)(2), the automatic-effectiveness clock that still lets the SEC delay a filing or the issuer amend it. Until one of those things happens, The 2x Zcash ETF is a proposed series, not a fund you can buy.

A daily 200% objective on options and futures

The sole series in the amendment is The 2x Zcash ETF. Its stated objective is to seek daily investment results, before fees and expenses, corresponding to two times, or 200%, of the daily performance of ZEC as measured by a benchmark the filing does not name. The paper says that objective is not sought for any period other than a single day: returns over a week or a month can diverge sharply from twice the coin’s move, and losses can exceed the move in ZEC.

The fund would not hold ZEC. It would not maintain a digital-asset wallet or control private keys. Indirect exposure would come primarily through options on ZCSH and through Zcash futures contracts, and, to a lesser extent, through cash-settled swaps, shares of the underlying ETP, or other derivatives. Leverage, the paper warns, can increase costs and magnify gains and losses.

The filing describes ZCSH as a 1933 Act trust that holds the token, not a 1940 Act fund, sponsored by a Grayscale affiliate that earns a sponsor fee. The 2x fund would sit in Grayscale Funds Trust, the same registered investment company that already runs options-on-ETP income series such as the Grayscale Bitcoin Covered Call ETF, BBTCC. This amendment identifies only the new leveraged series. It does not rewrite the trust’s other funds.

The listed Zcash product the 2x fund would trade against

Grayscale brought ZCSH onto NYSE Arca on Tuesday, August 25, converting its Zcash trust, and called it the first exchange-traded product to offer spot exposure to ZEC, a cryptocurrency that allows optional transaction privacy. The listed fund charges 2.50%.

It has grown quickly. On Tuesday, September 8, two weeks after the listing, Grayscale said assets had risen to more than $500 million, the same day it said options on ZCSH began trading on NYSE Arca. Shares closed Wednesday at $100.22, up 9.3% on the session and 56.4% from the last close before the NYSE Arca listing. Over the five sessions through Wednesday they gained 50.5%.

Shares finished 0.06% above net asset value, a tight gap for a product that, as a private trust, used to trade at deep discounts to its coins.

None of that is a 2x result, and none of it is promised to holders of a fund that has not been declared effective. It is the book the proposed options overlay would sit on top of. Any options the 2x series eventually bought or sold would be written on a product that already takes 2.50% a year, using contracts that had begun trading the day before. The paper does not say what the leveraged wrapper itself would charge on top of that.

Bitcoin 2x gathered assets; altcoin 2x has not

Daily 2x crypto is no longer an empty category, but the money is in bitcoin.

Volatility Shares’ 2x bitcoin futures fund, CBITX, charges 2.75%. ProShares’ 2x bitcoin fund, ABITU, charges 0.98%. Volatility Shares’ 2x Solana fund, DSOLT, charges 2.92% and runs a Solana futures book. ProShares’ 2x XRP fund is CUXRP.

No fund in that group is a 2x Zcash product. If this registration became effective in the form filed, it would be Grayscale’s first daily 2x series.

The 2x bitcoin funds cleared, launched, and gathered assets over years. Altcoin 2x products that did list remain small. The paper in front of the SEC does not say Grayscale will get a different result.

What Wednesday’s paper does not change

Holders of ZCSH do not get a new fee, a new custodian, or a new objective from this amendment. Holders of Grayscale Funds Trust’s other series do not either. Registrations get amended. Clocks get reset. Proposed series sometimes never list.

A daily-reset 2x fund has to rebalance every session. This one would do that on options written on a two-week-old ETP already charging 2.50%, with the wrapper’s own fee still blank. Whether that stack can deliver twice ZEC’s daily move is not a question Wednesday’s paper answers.