Grayscale launches Aave Trust Fund and does not rule out seeking transformation into ETF.

Grayscale Investments announced the launch of Grayscale Aave Trust, aiming to provide investors with direct exposure to the AAVE token, the governance token behind the decentralized lending platform Aave. AAVE is currently the second-largest protocol in terms of locked assets in the DeFi space, with a total value locked of $11.7 billion.

Grayscale Bridges AAVE Governance Token Investment

The Grayscale Aave Trust provides investors with exposure to AAVE, the governance token of the Aave decentralized lending platform. Aave is designed to facilitate open, transparent, and decentralized lending through the use of self-executing smart contracts, eliminating the need for traditional financial intermediaries. This structure reduces human bias and enhances accessibility by offering lending without the need for credit scores, identity verification, or background checks, distinguishing it from traditional lending institutions.

Rayhaneh Sharif-Askary, Product and Research Director at Grayscale, stated: "The Grayscale Aave Trust allows investors to access a protocol that has the potential to revolutionize traditional finance. By leveraging blockchain technology and smart contracts, Aave's decentralized platform aims to optimize the lending process, eliminate intermediaries, and reduce reliance on human judgment."

Open Daily Subscription to Accredited Investors

The trust is now open for daily subscriptions to individual and institutional accredited investors. Operating similarly to other single-asset investment trusts by Grayscale, it focuses on investing in tokens related to the Aave protocol.

To be considered an accredited investor, individuals must meet certain financial criteria, such as having an annual income exceeding $200,000 or a joint income with a spouse of $300,000, or possessing a net worth exceeding $1 million excluding their primary residence. Corporations must have at least $5 million in liquid assets or ensure that all beneficial owners are accredited investors.

Potential ETF Seek, but No Guarantee

Grayscale plans to seek secondary market listing for shares of its new products, providing investors with broader trading opportunities.

However, obtaining these listings is not guaranteed. Various regulatory considerations, including approvals from the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), may affect whether shares of new products like Grayscale Aave Trust can be quoted on the secondary market. Investors should be prepared for the possibility that their shares may not receive approval and that their investment may be held indefinitely.

Grayscale states that share prices traded on the secondary market do not always reflect the actual value of the digital assets held by the trust, minus its fees and liabilities. Shares may sometimes trade at a premium or discount, resulting in significant disparities between market prices and asset values.

Understanding the Risks of Investing in Aave and AAVE

Grayscale notes that investing in the Aave Trust carries inherent risks associated with the performance and functionality of the Aave protocol and its ecosystem. Launched in 2017, the Aave protocol relies on innovative mechanisms such as aTokens, flash loans, and other peer-to-peer lending features. Any failures or issues with these components could adversely affect the value of AAVE, thereby impacting investments made through the trust.

Another significant risk factor is the volatility of digital assets. The value of digital assets like AAVE may experience significant fluctuations. Such volatility could have a substantial negative impact on the trust's value, posing the risk of investors losing some or all of their investment.

Grayscale warns that investors should understand that the private placement securities offered through the Grayscale Aave Trust are speculative and illiquid, involving high risks. Due to these factors, investments may not be easily converted into cash and there is a possibility of losing the entire investment.