10-Q: Grayscale Crypto 5 ETF Q2: Net Assets Decline Amid Market Shifts

Grayscale CoinDesk Crypto 5 ETF reports a significant decrease in net assets for the quarter ended December 31, 2025, driven by digital asset price depreciation and substantial share redemptions.

Summary

• Net assets decreased by 27% for the three months ended December 31, 2025, to $538.856 million, and by 31% for the six months ended December 31, 2025, from $777.222 million to $538.856 million.
• Net decrease in net assets resulting from operations was ($183.066) million for the three months ended December 31, 2025, and ($74.957) million for the six months ended December 31, 2025, a sharp reversal from positive results in the prior year.
• The Fund experienced a net realized and unrealized loss of ($182.167) million for the three months ended December 31, 2025, and ($69.086) million for the six months ended December 31, 2025, compared to gains of $235.735 million and $218.517 million for the same periods in 2024.
• Shares issued totaled 2,420,000 for the three months and 2,540,000 for the six months ended December 31, 2025, while shares redeemed amounted to 2,630,000 and 5,370,000 for the respective periods.
• The Principal Market NAV per Share decreased from $48.98 at June 30, 2025, to $41.33 at December 31, 2025.
• The Manager's Fee was significantly reduced from 2.5% to 0.59% annually, effective September 19, 2025, following the uplisting to NYSE Arca.
• The Fund began trading on NYSE Arca on September 19, 2025, and simultaneously commenced an ongoing redemption program.
• The Fund's portfolio rebalanced on November 3, 2025, with no changes to the underlying digital assets. A subsequent rebalancing on January 30, 2026, removed ADA and added BNB to the portfolio.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative report due to significant declines in net assets, net operating results, and NAV per share, driven by digital asset price depreciation and substantial redemptions, despite positive operational changes like fee reduction and NYSE Arca listing.

Positives

• The Manager's Fee was significantly reduced from 2.5% to 0.59% annually, effective September 19, 2025, which lowers ongoing expenses for shareholders.
• The Fund's uplisting to NYSE Arca on September 19, 2025, and the commencement of an ongoing redemption program are expected to improve price discovery and reduce historical premiums/discounts to NAV.
• The Fund successfully rebalanced its portfolio in line with the CoinDesk 5 Index methodology, ensuring alignment with its stated investment objective.

Negatives

• Net assets decreased by 27% for the three months and 31% for the six months ended December 31, 2025, primarily due to digital asset price depreciation.
• The Fund reported a net decrease in net assets resulting from operations of ($183.066) million for the three months and ($74.957) million for the six months ended December 31, 2025, a significant decline from positive results in the prior year.
• A net realized and unrealized loss on investments in digital assets of ($182.167) million for the three months and ($69.086) million for the six months ended December 31, 2025, contrasts sharply with gains in the previous year.
• The Fund experienced substantial net redemptions of Shares, with 2,830,000 shares (valued at $163.409 million) redeemed for the six months ended December 31, 2025.
• The Principal Market NAV per Share declined from $48.98 at June 30, 2025, to $41.33 at December 31, 2025.
• Total return for the six months ended December 31, 2025, was -15.62%, a substantial underperformance compared to the 40.08% return for the same period in 2024.

Risks

• Investing in digital assets is highly speculative and volatile, with prices subject to significant fluctuations due to factors like global supply and demand, theft, competition, and geopolitical conditions.
• The Fund Components are commingled, and in the event of the Fund's insolvency, its assets may be inadequate to satisfy shareholder claims.
• There is a risk of loss or theft of Fund Components due to the absence of a central clearing house or major depository, and no assurance that the Custodian will maintain adequate insurance coverage.
• Regulatory uncertainty exists regarding the classification of digital assets as securities; if a Fund Component (such as SOL, XRP, or ADA, which represented 8.28% of NAV) is deemed a security, it could adversely affect its value and the Fund's Shares.
• If a Fund Component is determined to be a security, the Fund and Manager may face additional regulatory requirements, including under the Investment Company Act of 1940, and non-compliance could lead to Fund termination.
• The Fund is subject to operational risks related to the peer-to-peer networks of digital assets and reliance on third-party service providers, including potential technical vulnerabilities or business disruptions.
• The Manager and/or the Fund may be subject to various litigation, regulatory investigations, and other legal proceedings in the ordinary course of business.

Future Outlook

The Manager expects the Fund will not record any cash flow from its operations, with its cash balance typically zero at the end of each reporting period, as cash is primarily used to facilitate creations and redemptions. Any cash held from digital asset sales during rebalancing or contributions is intended to be used to purchase additional Fund Components during the next rebalancing period, generally within 90 days, though the Manager retains discretion to hold cash longer. The SEC's crypto task force is in early stages, and future digital asset regulation remains uncertain.

Management Comments

• "The Fund has begun to meet its investment objective more closely following the uplisting of the Shares to NYSE Arca."
• "The Manager expects that the Fund will not record any cash flow from its operations and that its cash balance will be zero at the end of each reporting period."
• "The Manager intends to use any cash held by the Fund to purchase additional tokens of the Fund Components then held by the Fund in proportion to their respective Fund Weightings during the next Fund Rebalancing Period."
• "The Manager does not currently expect to hold cash for a period of more than 90 days."
• "The Manager may, in its sole discretion, decide to cause the Fund to hold cash for longer than 90 days and to use any cash it holds for any other lawful purpose."
• "The Manager does not expect the foregoing proceedings to have a material adverse effect on the Fund's business, financial condition or results of operations."

Industry Context

StockSavvy.ai notes that the digital asset market experienced significant volatility during the reporting period, as evidenced by the price depreciation of the Fund's underlying crypto assets. The SEC's ongoing efforts to establish a clear regulatory framework for digital assets, including the formation of a crypto task force and Project Crypto, highlight the evolving and uncertain regulatory landscape that continues to impact the broader cryptocurrency industry. The dismissal of enforcement actions against Coinbase and Cumberland DRW, LLC, while positive for those specific entities, underscores the fragmented and unpredictable nature of regulatory enforcement in the digital asset space, particularly concerning the classification of various tokens as securities.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to industry benchmarks beyond its own historical performance and the general market movements of digital assets.
• The Fund's performance prior to September 19, 2025, is explicitly stated as not directly comparable to periods after due to the uplisting to NYSE Arca and the initiation of an ongoing share creation and redemption program.
• Management notes that the Fund has begun to meet its investment objective more closely following the uplisting, implying an improved alignment with the underlying asset values compared to its previous trading on OTCQX, where it often traded at substantial premiums or discounts.

Management Changes

Corporate Governance

Legal Proceedings

• Grayscale Operating, LLC (former Co-Manager) was a party to certain legal proceedings during the period, though the Fund itself is not a party.
• The SEC brought charges against Digital Asset Trading Platforms Binance and Coinbase in June 2023, asserting SOL, ADA, and other digital assets are securities.
• The SEC brought charges against Digital Asset Trading Platform Kraken in November 2023.
• The SEC filed enforcement actions against Mango Labs, LLC, Mango DAO, Blockworks Foundation, and Cumberland DRW, LLC, describing SOL as a security.
• In February 2025, the SEC filed a joint stipulation with Coinbase to dismiss the enforcement action against it.
• In March 2025, the SEC dismissed its enforcement action against Cumberland DRW, LLC.
• Ripple Labs, Inc. (issuer of XRP) is a defendant in a federal class-action lawsuit alleging XRP is a security, and the SEC filed a complaint against Ripple in 2020 regarding unregistered XRP sales.
• In July 2023, a District Court held XRP is not a security, but certain sales were investment contracts; appeals were dismissed by both parties on August 7, 2025.

Related Party Transactions

• Managers Fee paid to Grayscale Investments Sponsors, LLC (a related party) amounted to $899 thousand for the three months and $5,871 thousand for the six months ended December 31, 2025.
• 937,593 Shares of the Fund were held by related parties as of December 31, 2025.
• Digital Currency Group, Inc. (DCG), the indirect parent company of the Manager, had an authorization to purchase up to $200 million worth of Shares, but had not purchased any through December 31, 2025.
• Grayscale Securities, LLC, an affiliate of the Manager, served as the sole Authorized Participant from October 3, 2022, to September 18, 2025, but no longer serves in that capacity.

Stakeholder Impact

• Shareholders experienced a significant decrease in NAV per share and total return due to digital asset price depreciation and net redemptions, but benefit from the reduced Manager's Fee and improved liquidity/price discovery from the NYSE Arca listing and redemption program.
• The Manager (Grayscale Investments Sponsors, LLC) continues to earn management fees, albeit at a reduced rate, and remains responsible for the Fund's administration and rebalancing.
• Authorized Participants benefit from the new redemption program and the ability to create/redeem shares, facilitating arbitrage and potentially improving market efficiency.
• Service Providers (Custodian, Transfer Agent, etc.) are engaged under new agreements, providing essential services to the Fund's operations.

Next Steps

• The Manager will continue to rebalance the Fund's portfolio quarterly during a period beginning on the last business day of each January, April, July, and October.
• Each Fund Rebalancing Period is expected to last between one and five business days.
• The Manager intends to use any cash held by the Fund to purchase additional tokens of the Fund Components during the next Fund Rebalancing Period.
• The SEC's crypto task force will continue efforts to draft clear and simple rules for crypto asset distributions, custody, and trading.

Key Dates

Recommendation

The Grayscale CoinDesk Crypto 5 ETF experienced a substantial decline in net assets and NAV per share, coupled with significant net redemptions and negative operating results for the period. While the reduction in management fees and the NYSE Arca listing are positive operational developments, the underlying digital asset price depreciation and the overall negative financial performance indicate a challenging environment for the Fund. The ongoing regulatory uncertainty surrounding digital assets, particularly the classification of some Fund Components as securities, adds a layer of risk. A seasoned investor would likely view the current financial performance and market conditions as a strong signal to reduce exposure or exit the position, especially given the availability of redemption mechanisms post-uplisting.

Keywords

Grayscale CoinDesk Crypto 5 ETF, GDLC, Digital Assets, Cryptocurrency, ETF, Bitcoin, Ether, XRP, Solana, Cardano, BNB, SEC Filing, Q2 Earnings, Financial Report, Investment Fund, Crypto Market, Net Asset Value, Redemptions, NYSE Arca, CoinDesk 5 Index