Grayscale files ZCSH High-Income ETF, targets biweekly payouts – Here’s how it works!

Grayscale Funds Trust has filed a new proposal with the United States Securities and Exchange Commission (SEC) on the 25th of September for a new product called the ZCSH High-Income ETF.

Interestingly, this new ETF is not the same product as Grayscale’s existing Zcash ETF (ZCSH).

In fact, the new fund is designed to generate income from options linked to ZCSH, rather than simply holding Zcash [ZEC]. But someone investing in this ETF should not expect it to capture the full upside of ZEC or ZCSH during a strong rally.

All About ZCSH High-Income ETF

The proposed ZCSH High-Income ETF will use options linked to Grayscale’s Zcash ETF (ZCSH), selling call options to generate premium income and making biweekly distributions.

However, this strategy can limit its upside if ZCSH rises sharply beyond the options’ strike prices, meaning investors may trade some potential gains for regular income.

The fund will not directly hold ZEC. Instead, it will gain exposure through derivatives and may hold short-term U.S. Treasuries and money-market funds as collateral. 

However, as of now, the SEC has not approved or disapproved the securities, and the prospectus is still subject to change.

ZEC price action and open interest tell a different story

Yet, this was not reflected in ZEC’s price action, which was trading at $1,532.82 at press time after a drop of 3.3% in the past 24 hours but a hike of 200% in the year so far.

The RSI and CMF indicators lying below the neutral line further suggested that bulls are not that strong at the moment. 

Meanwhile, ZEC’s Open Interest has risen sharply alongside its price, particularly since late August.

OI climbed from below $1 billion to around $3 billion, peaking near $3.5 billion around the 19th of September, while ZEC’s price surged from roughly $500 to above $1,500. However, the OI has was down to $3 billion at press time suggesting caution. 

Grayscale’s Zcash ETF breaks records

This coincided with Grayscale’s Zcash ETF (ZCSH) reaching $1 billion in AUM on the 24th of September.

However, only $306.12 million came from cumulative net inflows, with the rest largely reflecting the rising value of its existing ZEC holdings inherited from the Grayscale Zcash Trust.

All this happened after, Zcash (ZEC) gained momentum after trader Garrett Jin closed his 38,000 ZEC short position at an estimated $36 million loss, reducing bearish pressure.

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Final Summary

• The ZCSH High-Income ETF is not the same product as Grayscale’s existing Zcash ETF (ZCSH).
• The current price action of ZEC is suggesting caution and upcoming bearish pressure.