The XRP (XRP 0.69%) cryptocurrency, often known as Ripple, jumped as much as 6.5% higher on Thursday morning. By 11:45 a.m. ET, the digital currency traded at 4.4% above the price from Wednesday's traditional market-closing bell. XRP rose as a familiar fund manager announced the formation of a mutual fund focused on owning XRP tokens.
CRYPTO: XRP
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Grayscale's history with crypto funds
The fund manager in question is Grayscale, a veteran of running mutual funds and exchange-traded funds (ETFs) in the cryptocurrency sector. The Grayscale Bitcoin Trust ETF (GBTC +2.81%) was launched as a mutual fund in 2015, and the Grayscale Ethereum Trust (ETHE +2.97%) came along three years later. Both funds were converted into ETFs in 2024 as the U.S. Securities and Exchange Commission (SEC) finally allowed the creation of spot-price crypto ETFs.
Today, the firm has started up an XRP trust, which is currently available only to accredited investing professionals. The fund should become available to retail investors over time, followed by quarterly management reports to the SEC and then an ETF conversion. That's Grayscale's published lifecycle for crypto funds, and its XRP product is only getting started.
Still, every step down this path should make this cryptocurrency more easily available to various investor types, so this morning's bullish market reaction makes sense.
NYSEMKT: GBTC
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A small step forward and a long way left to go
The Grayscale XRP Trust has a long way to go before evolving into a proper ETF. The Grayscale Solana Trust, for instance, has been idling at the "public quotation" stage for more than a year. And the firm is not yet sending financial reports to the SEC about this fund, which is based on a larger and more popular cryptocurrency. XRP presumably stands on a lower rung in Grayscale's priority list.
These early crypto funds come with Grayscale's usual baggage. The Ethereum and XRP funds have annual expense ratios of 2.5%, far above the average expense ratio of 0.25% for Ethereum or Bitcoin ETFs.
The company is doing important work, paving the way for XRP-based ETF filings from all-comers in the long run, but it also wants a hefty slice of early investors' potential returns. This is good news in a general sense, but I'm not exactly champing at the bit to add the Grayscale XRP fund to my own portfolio. A modest direct investment in XRP is good enough for now, perhaps to be followed by low-fee XRP ETFs in my IRA account someday.
