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What Is a Litecoin ETF: What You Need To Know

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Lorena Nessi
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Key Takeaways

  • The SEC received and published Grayscale’s application to convert Litecoin Trust into a spot ETF. 
  • Litecoin ETFs may offer more convenient trading than directly owning Litecoin. 
  • Investing in Litecoin ETFs carries inherent risks, such as price volatility and potential tracking errors.
  • Regulators must approve Litecoin ETFs before they can be widely available in the market.

The crypto market’s rapid expansion has created diverse investment options. 

Exchange-traded funds (ETFs) are one type; they offer simplified access to digital assets. After the SEC approved Bitcoin and Ethereum ETFs in 2024, Litecoin ETFs are now on the horizon. 

But is there a Litecoin ETF already?

No, the Litecoin ETF has not been approved yet. On Jan. 15, Canary Capital filed an amended Litecoin  ETF application with the Securities and Exchange Commission (SEC), fueling hopes for broader adoption. Key developments signal progress, as Canary Capital’s spot Litecoin ETF filing has entered the review phase, while Grayscale seeks to convert its Litecoin Trust into an ETF. These moves could enhance Litecoin’s market accessibility, though approval remains uncertain.

Investors often call Litecoin ‘silver to Bitcoin’s gold.’ Launched in 2011, this peer-to-peer cryptocurrency offers faster transactions and a different hashing algorithm than Bitcoin. Its quicker block times make it a key player in the crypto space. 

This article explains Litecoin ETFs, detailing how they work and what they mean for the crypto ecosystem.

SEC Acknowledges Spot Litecoin ETF Filing

Recent developments indicate growing momentum in cryptocurrency ETFs. On January 29, 2025, the SEC acknowledged Canary Capital’s 19b-4 filing for a spot Litecoin ETF, making it the first altcoin ETF to reach this stage. This acknowledgment starts a 240-day review period for approval or rejection.

Additionally, Grayscale Investments seeks to convert its Grayscale Litecoin Trust (GLTC) into a spot ETF, aiming to provide regulated exposure to Litecoin. On February 6, 2025, the SEC accepted Grayscale’s application for review, marking another key step in the process.

These filings show the SEC’s growing engagement with crypto investment products beyond Bitcoin and Ethereum, aligning with institutional interest in diversified crypto assets. However, it is important to note that the review process remains extensive, and approval is not guaranteed.

What Is a Litecoin ETF?

A Litecoin ETF is a type of investment that aims to expose investors to the price movements of Litecoin (LTC) by holding it as an asset or replicating its value through derivatives. It allows investors to track LTC price movement without requiring them to directly own, store, or manage the cryptocurrency.

Investors trade ETFs on stock exchanges as shares. For Litecoin ETFs, this involves mirroring the cryptocurrency’s performance.

Unlike holding Litecoin directly, an ETF removes the complexities of managing wallets or private keys, offering a more straightforward investment method.

ETFs, in general, offer the following benefits: 

  • Diversification: ETFs enable exposure to asset classes without requiring direct ownership.
  • Liquidity: Investors can easily trade them on stock exchanges. This means investors can easily buy or sell ETF shares throughout trading, providing flexibility and ease of entry and exit.
  • Lower costs: ETFs often have lower fees than other investment vehicles like mutual funds.

How Does a Litecoin ETF Work?

ETFs function by tracking an underlying asset or index. In the case of Litecoin ETFs, the ETF provider (for example, Canary Capital if their application is approved) would purchase and hold a certain amount of LTC and then issue shares representing ownership of a portion of those holdings. 

These shares are then traded on stock exchanges, making them as easily accessible as traditional stocks for retail and institutional investors.

The ETF’s share price aims to mirror the price fluctuations of Litecoin closely.

Market makers, such as trading firms or banks, play a crucial role in ensuring this price alignment. They are financial firms that facilitate trading by continuously buying and selling ETF shares, creating liquidity, and keeping the ETF’s price close to its net asset value (NAV).

The NAV represents the total value of the Litecoin held by the fund, the Litecoin ETF, minus expenses, divided by the number of outstanding shares of that specific ETF.

There are two  main types: 

  • Physically backed ETFs: These ETFs hold Litecoin in custody, reflecting its market price.
  • Synthetic ETFs: These rely on financial instruments like futures to replicate Litecoin’s price movements, though this is less common for cryptocurrencies due to regulatory concerns.

The industry has expressed its hopes for a positive outcome. 

Benefits of a Litecoin ETF for Investors

ETF can offer a range of benefits to investors that, in the case of Litecoin, can potentially be:

  • Accessibility: Litecoin ETFs allow retail investors to access cryptocurrency markets through traditional brokerage accounts.
  • Regulation and security: These funds often operate under regulatory frameworks, potentially offering enhanced security compared to holding Litecoin directly.
  • Liquidity: ETFs improve market liquidity by enabling easier trading with narrower bid-ask spreads.
  • Diversification: A Litecoin ETF can diversify an investment portfolio by adding exposure to the cryptocurrency market.
  • Tax implications: While specific tax rules depend on jurisdictions, ETFs may simplify tax reporting compared to direct cryptocurrency holdings.

Challenges and Risks of Litecoin ETF

However, the benefits of a Litecoin ETF come also with the following challenges:

  • Regulatory hurdles: Cryptocurrency ETFs, including Litecoin ETFs, face regulatory challenges. Approval from authorities like the SEC is often difficult to secure.
  • Market volatility: Cryptocurrency prices are highly volatile, and Litecoin ETFs are no exception.
  • Tracking error: Due to trading costs, fees, and operational factors, ETFs may not perfectly mirror Litecoin’s price.
  • Custody and security risks: Physically backed Litecoin ETFs rely on secure storage, which poses risks even for institutional custodians.
  • Fees: Management fees reduce the returns on ETFs, which may impact long-term profitability.

Conclusion

Litecoin ETFs could make it easier for people to invest in Litecoin. These funds try to match the price of Litecoin, offering a more regulated way to invest than buying Litecoin directly.

However, there are also some downsides. Prices can change quickly, and the funds might not perfectly track Litecoin’s price. 

Also, it is not certain if regulators will approve these funds. The recent application for a Litecoin ETF has increased interest, but it is important to remember that approval is not guaranteed.

FAQs

How do ETF providers secure the Litecoin they hold?

ETF providers secure Litecoin with robust custody solutions. These solutions often use cold storage and institutional-grade security protocols.

What are the fees associated with a Litecoin ETF?

Litecoin ETFs would charge annual expense ratios. These fees aim to cover management and operations and reduce investors’ returns.

Are there any limitations on who can invest in a Litecoin ETF (e.g., accredited investors only)?

If regulators approve them, all investors with brokerage accounts, not just accredited investors, can buy Litecoin ETFs on public exchanges.

What are the differences between a Litecoin ETF and other cryptocurrency investment products, such as futures contracts or trusts?

Litecoin ETFs trade like stocks on exchanges, offering simpler access than complex futures contracts or differently structured trusts.





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Lorena Nessi

Lorena Nessi is an award-winning journalist and media and technology expert. She is based in Oxfordshire, UK, and holds a PhD in Communication, Sociology, and Digital Cultures, as well as a Master’s degree in Globalization, Identity, and Technology. Lorena has lectured at prestigious institutions, including Fairleigh Dickinson University, Nottingham Trent University, and the University of Oxford. Her journalism career includes working for the BBC in London and producing television content in Mexico and Japan. She has published extensively on digital cultures, social media, technology, and capitalism. Lorena is interested in exploring how digital innovation impacts cultural and social dynamics and has a keen interest in blockchain technology. In her free time, Lorena enjoys science fiction books and films, board games, and thrilling adventures that get her heart racing. A perfect day for her includes a spa session and a good family meal.
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