Grayscale Zcash ETF Launches with High Fee, Concentration Concerns
On August 25, Grayscale's Zcash ETF (ZCSH) will start trading on NYSE Arca after receiving final regulatory clearances. The fund offers investors brokerage-account access to the largest privacy coin by market capitalization, but there are three key things to know before investing.
The annual management fee is 2.5%, which is ten times higher than the largest Bitcoin ETF, BlackRock's iShares Bitcoin Trust (IBIT), which charges 0.25% annually. This means that an investor who puts $10,000 into ZCSH would have roughly $7,776 of real exposure to ZEC after ten years due to fees alone.
Another concern is the nonbinding agreement between Grayscale and DCG International Investments Ltd., which could put a single entity in control of approximately 34% of the fund's assets. This concentration creates a specific risk, as if DCG redeems its position, it could meaningfully reduce the fund's AUM and potentially strain the NAV tracking mechanism.
The Grayscale Zcash Trust has existed since 2017, but until now, it traded over the counter with no mechanism to keep its share price aligned with the value of the underlying ZEC. The ETF conversion eliminates this problem through an authorized participant (AP) mechanism that allows large market-making firms to create new shares when the fund trades above NAV and redeem shares when it trades below.