10-Q: Grayscale Crypto 5 ETF Q3: Assets Dip, NYSE Arca Uplisting

Grayscale CoinDesk Crypto 5 ETF reports a 5% decrease in net assets to $740.6 million for Q3 2025, following its uplisting to NYSE Arca and commencement of a redemption program.

Summary

• Net assets decreased by 5% to $740.6 million as of September 30, 2025, from $777.2 million at June 30, 2025.
• Net increase in net assets resulting from operations was $108.1 million for the three months ended September 30, 2025, a significant improvement from a net decrease of ($20.4) million in the same period of 2024.
• The Fund successfully uplisted to NYSE Arca on September 19, 2025, and commenced an ongoing redemption program.
• The Manager's Fee was substantially reduced from 2.5% to 0.59% effective September 19, 2025.
• Shares issued totaled 120,000 for $6.4 million, while 2,740,000 Shares were redeemed for $151.1 million, resulting in a net decrease of 2,620,000 Shares.
• Principal Market NAV per Share increased to $55.91 at September 30, 2025, from $48.98 at June 30, 2025.
• The total return for the three months ended September 30, 2025, was 14.15%.
• The Fund's portfolio as of September 30, 2025, consisted primarily of Bitcoin (73.69%), Ether (16.26%), XRP (5.47%), Solana (3.64%), and Cardano (0.94%).

Sentiment

Score: 7

Explanation: The Fund experienced a significant positive shift in net assets from operations and successfully executed strategic initiatives like uplisting to NYSE Arca and reducing fees, which are beneficial for investors. However, the overall decrease in net assets due to redemptions and persistent regulatory uncertainty surrounding certain digital assets temper the overall positive sentiment.

Positives

• Net increase in net assets from operations of $108.1 million for the three months ended September 30, 2025, a significant turnaround from a $20.4 million decrease in the prior year period.
• Successful uplisting of Shares to NYSE Arca on September 19, 2025, which is expected to improve the alignment of Share price with Net Asset Value (NAV).
• Commencement of an ongoing redemption program effective September 19, 2025, addressing a historical issue where Shares traded at substantial premiums/discounts due to the lack of redemption mechanisms.
• Significant reduction in the Manager's Fee from 2.5% to 0.59% effective September 19, 2025, which directly benefits shareholders by lowering expenses.
• Positive total return of 14.15% for the three months ended September 30, 2025, indicating strong performance of the underlying digital assets.
• Increase in Principal Market NAV per Share from $48.98 at June 30, 2025, to $55.91 at September 30, 2025.

Negatives

• Overall net assets decreased by 5% ($36.6 million) from $777.2 million at June 30, 2025, to $740.6 million at September 30, 2025.
• Experienced significant net redemptions of 2,620,000 Shares, valued at $144.7 million, indicating outflows from the Fund.
• Net change in unrealized appreciation on investments in digital assets was negative ($21.5 million) for the three months ended September 30, 2025.

Risks

• Investing in digital assets is highly speculative and volatile, with prices influenced by factors such as global supply and demand, theft, competition, and geopolitical conditions.
• The Fund is subject to custody risk due to the absence of a central clearing house or major depository for digital assets, and there is a risk of loss or theft of Fund Components, with no assurance of adequate insurance coverage from the Custodian.
• Significant regulatory uncertainty exists regarding the classification of digital assets as securities under federal or state laws, which is complex and difficult to predict.
• SOL, XRP, and ADA, which represent approximately 10.05% of the Fund's Principal Market NAV, have been cited in SEC enforcement actions or lawsuits as potentially being securities.
• A determination that a Fund Component is a security could materially and adversely affect its value, liquidity, and general acceptance, potentially leading to the Fund and Manager being subject to additional regulatory requirements (e.g., Investment Company Act of 1940, Investment Advisers Act of 1940).
• If the Manager determines not to comply with additional regulatory requirements, the Fund may be terminated, potentially resulting in the liquidation of digital assets at a disadvantageous time for shareholders.
• Operational risks include the potential loss, destruction, or compromise of private keys required to access Fund Components, making them irretrievable.
• Reliance on third-party service providers (Custodian, Prime Broker, Transfer Agent, etc.) exposes the Fund to risks of business failures, financial instability, security failures, or operational problems affecting critical services.
• The Manager and 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's cash balance to be zero at the end of each reporting period, as cash is primarily used to facilitate creations and redemptions or to purchase Fund Components during rebalancing. The Manager does not currently expect to hold cash for more than 90 days, intending to use it to purchase additional Fund Components. However, the Manager may, in its sole discretion, decide to hold cash for longer or for other lawful purposes. The Manager has observed that the Fund has begun to meet its investment objective more closely following the uplisting of the Shares to NYSE Arca, implying a more stable trading environment.

Management Comments

• The Manager has observed that the Fund has begun to meet its investment objective more closely following the uplisting of the Shares to NYSE Arca.
• The Manager does not expect the Management Reorganization to have any material impact on the operations of the Fund.
• The Manager does not expect the foregoing proceedings [legal] to have a material adverse effect on the Funds business, financial condition or results of operations.

Industry Context

The digital asset market remains highly speculative and volatile, with significant price fluctuations influenced by various factors including global supply and demand, theft, competition, and geopolitical conditions. Regulatory uncertainty, particularly regarding the classification of digital assets as securities by the SEC, continues to be a major concern for the industry, as evidenced by recent SEC actions against Binance, Coinbase, and Kraken, and the ongoing Ripple lawsuit. The uplisting of the Grayscale CoinDesk Crypto 5 ETF to NYSE Arca and the introduction of a redemption program align with broader industry trends towards more regulated and accessible investment vehicles for digital assets, similar to spot Bitcoin and Ethereum ETFs. This move aims to reduce the historical premiums and discounts observed in trust structures. The reduction in the Manager's Fee from 2.5% to 0.59% reflects increasing competition and fee compression within the digital asset ETF space, driven by the entry of new players and the maturation of the market.

Comparison to Industry Standards

• The reduction of the Manager's Fee from 2.5% to 0.59% brings it closer to the competitive fee structures seen in newly launched spot crypto ETFs, such as those for Bitcoin and Ethereum, which typically range from 0.20% to 0.60%. For example, Grayscale Bitcoin Trust ETF (GBTC) also reduced its fee upon conversion to an ETF.
• The uplisting to NYSE Arca and the commencement of a redemption program are standard features of actively traded ETFs, allowing for arbitrage mechanisms that help keep the market price of shares aligned with their underlying Net Asset Value (NAV). This addresses a long-standing issue with Grayscale's previous trust structures, which often traded at significant premiums or discounts to NAV, unlike typical ETFs from providers like BlackRock (IBIT) or Fidelity (FBTC) which maintain tight tracking.
• The Fund's portfolio composition, heavily weighted towards Bitcoin (73.69%) and Ether (16.26%), reflects the dominant market capitalization of these two digital assets, a common characteristic among diversified crypto funds aiming for broad market exposure.
• The inclusion of XRP, SOL, and ADA, despite regulatory uncertainties, indicates a strategy to capture a broader segment of the large-cap digital asset market, similar to other diversified crypto indices. However, this also exposes the fund to specific regulatory risks, as highlighted by the SEC's actions against certain digital assets.

Management Changes

Corporate Governance

Legal Proceedings

• The SEC launched a crypto task force in January 2025 to develop a comprehensive and clear regulatory framework for digital assets.
• The SEC brought charges against Binance and Coinbase in June 2023, asserting that SOL, ADA, and other digital assets are securities under federal securities laws.
• The SEC brought charges against Kraken in November 2023 for alleged violations of various securities laws.
• The SEC filed enforcement actions against Mango Labs, LLC, Mango DAO, and Blockworks Foundation in September 2024, and Cumberland DRW, LLC in October 2024, describing SOL and other digital assets as examples of crypto assets offered and sold as securities.
• 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. (the company stewarding XRP) is a defendant in a federal class-action lawsuit alleging XRP is a security.
• In July 2023, the District Court for the Southern District of New York held that while XRP is not a security, certain sales of XRP amounted to investment contracts. A final judgment was entered on August 7, 2024, and appeals were dismissed on August 7, 2025.
• Grayscale Operating, LLC (the former Co-Manager) was a party to certain legal proceedings, though the Fund was not. The Manager does not expect these proceedings to have a material adverse effect on the Fund's business, financial condition, or results of operations.

Related Party Transactions

• Managers Fee is paid to Grayscale Investments Sponsors, LLC (the Manager), which is a consolidated subsidiary of Digital Currency Group, Inc. (DCG).
• As of September 30, 2025, 1,056,457 Shares of the Fund were held by related parties.
• DCG, the indirect parent company of the Manager, approved a $200 million share purchase authorization for the Fund and other affiliated products on March 2, 2022, but had not purchased any Shares of the Fund as of September 30, 2025.
• Grayscale Securities, LLC, an affiliate of the Manager, was the sole Authorized Participant until September 18, 2025, after which unaffiliated Authorized Participants were engaged.

Stakeholder Impact

• Shareholders benefit from the reduced Manager's Fee (from 2.5% to 0.59%) and the uplisting to NYSE Arca with a redemption program, which is expected to improve liquidity and reduce price deviations from NAV.
• Shareholders are exposed to significant market volatility and regulatory risks associated with digital assets, particularly the potential classification of Fund Components (SOL, XRP, ADA) as securities.
• The Manager (Grayscale Investments Sponsors, LLC) will experience reduced fee revenue per asset managed but may benefit from increased market efficiency and potentially higher assets under management if the ETF structure attracts more investors.
• Authorized Participants, including new unaffiliated entities, benefit from the redemption program, enabling arbitrage opportunities to keep Share prices aligned with NAV.
• Regulators (SEC) continue to scrutinize digital assets, and ongoing legal proceedings and potential new regulations could impact the Fund and the broader digital asset market.

Next Steps

• The Manager will continue to rebalance the Fund's portfolio quarterly based on the CoinDesk 5 Index (CD5) methodology. The next rebalancing period is expected to begin on the last business day of January 2026.
• The Manager will continue to monitor the digital asset market and regulatory landscape, particularly concerning the classification of digital assets as securities.
• The Manager expects to promptly return any excess cash held from creation/redemption orders to counterparties.
• The Manager intends to use any cash held by the Fund to purchase additional tokens of Fund Components during the next Fund Rebalancing Period, unless otherwise decided.

Key Dates

Recommendation

The Grayscale CoinDesk Crypto 5 ETF has made significant positive structural changes, including uplisting to NYSE Arca and a substantial reduction in its management fee, which are expected to improve its market efficiency and long-term attractiveness. The positive operational results for the quarter, driven by realized gains, are also encouraging. However, the overall decline in net assets due to redemptions and the persistent, material regulatory uncertainty surrounding several of its core digital asset holdings (XRP, SOL, ADA) introduce considerable risk. While the fee reduction and improved trading mechanism are beneficial, the regulatory overhang could lead to significant price volatility or even fund termination if certain assets are definitively classified as securities. Therefore, a "hold" recommendation is appropriate for investors already exposed to the fund, while new investors should carefully weigh the improved structure against the inherent and evolving regulatory risks in the digital asset space.

Keywords

Grayscale, CoinDesk Crypto 5 ETF, GDLC, Digital Assets, Cryptocurrency, ETF, Bitcoin, Ether, XRP, Solana, Cardano, SEC Filing, 10-Q, Financial Report, Investment Fund, NYSE Arca, Redemption Program, Manager's Fee, Net Assets, NAV, Market Risk, Regulatory Risk