Company files to launch Litecoin ETF

Canary Capital, an investment manager, has filed a formal application to launch a Litecoin ETF in the United States. The objective is to attract investors interested in cryptocurrencies without the complexity of dealing directly with digital assets.

The move follows the recent request for an XRP ETF made by the same company at the beginning of the month, highlighting the growing institutional interest in the crypto market.

The Litecoin ETF will provide a simplified alternative for investors who want exposure to Litecoin's appreciation without having to purchase and store the cryptocurrency directly.

Traditionally, this process involves creating digital wallets, managing private keys and navigating cryptocurrency exchanges, activities that often intimidate or complicate the experience for those unfamiliar with the sector.

ETF de Litecoin

Canary Capital's Litecoin ETF will function similarly to other cryptocurrency exchange-traded funds (ETFs). In other words, the company promises to keep Litecoin as the fund's only asset, seeking to replicate the value of the cryptocurrency, discounting operational costs.

This way, investors will be able to buy ETF shares, which will be traded on the secondary market, following the market value of Litecoin.

Unlike purchasing Litecoin directly, which involves risks related to the security and volatility of cryptocurrency markets, the ETF will offer a more affordable and less risky way to gain exposure to the asset.

The manager undertakes to keep the majority of Litecoin in custody in “cold storage” (offline storage). This is a strategy that seeks to protect private keys from possible cyber attacks. A small portion of the cryptocurrencies will be held in “hot” (online) wallets to facilitate immediate transactions, if necessary.

The creation of a Litecoin ETF could have a significant impact on the cryptocurrency market. With the possibility of large financial institutions acting as authorized participants for the creation and redemption of ETF shares, there will be arbitrage opportunities that could influence the price of Litecoin.

Secondary market

Furthermore, by allowing investors to trade shares of the fund without the need to buy or sell Litecoin directly, the cryptocurrency's volatility could decrease as more trading will occur indirectly.

Interested investors will be able to trade the ETF on the secondary market, where shares will closely follow the price of Litecoin. This approach shows promise for attracting both individual and institutional investors. After all, it eliminates the need to deal with the technical complexities associated with storing and securing cryptocurrencies.

The filing for a Litecoin ETF comes at a time of heightened interest in cryptocurrency ETFs in the United States. Recently, Bitcoin ETFs reached a combined value of $60 billion in assets under management. This shows the growing confidence of investors in this type of product.