Grayscale has filed for a Zcash ETF that would pay shareholders every two weeks. The cash would come from selling options, not from owning the coin.
The filing reached the U.S. Securities and Exchange Commission (SEC) on September 25. It could take effect 75 days later, in early December.
How Grayscale’s Zcash Income ETF Would Pay Investors
The proposed ZCSH High Income ETF will not hold Zcash (ZEC), a privacy-focused cryptocurrency. Instead, it trades options tied to The Zcash ETF (ZCSH), Grayscale’s existing spot fund, according to the filing.
An option is a contract giving a buyer the right to trade an asset at a set price. The seller collects an upfront fee, called a premium.
The fund copies ZCSH’s price moves by pairing bought call options with sold put options. It then sells short-dated calls, mostly one month or less, to collect premiums. Those premiums fund the payouts.
At least 80% of net assets must sit in options on Zcash exchange-traded products. However, the filing says “high income” promises no set yield. Some payouts could simply return part of an investor’s own money.
What’s the Catch for Zcash ETF Investors?
Selling calls caps the upside. If ZEC rallies past the chosen strike price, the fund misses those gains. Meanwhile, it still absorbs the full drop when prices fall.
The options market is also brand new. ZCSH began trading on August 25, and its options followed on September 8.
Grayscale also flags a conflict. An affiliate of the fund’s adviser sponsors ZCSH and earns its fee, which Yahoo Finance lists at 2.50%. The filing says the new fund’s trading could lift ZCSH demand and, indirectly, that affiliate’s fees.
Zcash ETF Demand Sets Up the Income Play
ZCSH has drawn steady money. The fund converted from Grayscale’s 2017 trust with roughly $260 million in assets.
By the week ending September 18, assets hit $914.5 million after $271 million in cumulative inflows. That week’s $98.2 million haul led all crypto ETFs, BeInCrypto reported.
Similar income products already exist for Bitcoin (BTC). Grayscale runs a Bitcoin covered call ETF, and Goldman Sachs filed a Bitcoin premium income fund in April.
The new fund’s ticker, exchange, fees, and sub-adviser remain blank in the filing.
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