Grayscale Files Bi-Weekly Payout Zcash ETF, Less Than 3 Weeks After Its 2x Fund Filing

Grayscale flagged ZCSH's limited trading history and warned that the strategy could limit potential gains while still leaving investors exposed to losses.

• The proposed Zcash High Income ETF would not hold ZEC directly and would instead use options tied to Zcash exchange-traded products. 
• The filing came just 16 days after Grayscale proposed a 2x Zcash ETF and less than 3 weeks after options on ZCSH began trading. 
• The fund plans to make distributions every two weeks, though "high income" does not guarantee a specific yield.

Grayscale expanded its Zcash (ZEC) push on Friday, filing for an income-focused ETF just within a little more than two weeks after proposing a leveraged Zcash fund. 

The proposed ZCSH ETF High Income ETF would pay investors every two weeks according to its filing with the U.S. Securities and Exchange Commission (SEC). It would not hold ZEC directly. Instead, it would trade options on the Zcash ETF (ZCSH), Grayscale’s spot fund that began trading on the New York Stock Exchange (NYSE) Arca in late August.

This move comes about two weeks after Grayscale filed for a leveraged 2x Zcash ETF on September 9, according to a separate SEC filing. Options on ZCSH only started trading on September 8, according to the filing. This would mean that Grayscale is building an income product on an options market less than 3 weeks old. 

An option is a contract that gives the buyer the right to buy or sell an asset at a certain price and the seller of the option receives a fee upfront known as a premium.

How The Fund Works

The fund would use a synthetic covered call strategy according to the filing. It would buy calls and sell puts on ZCSH to track the fund's price. It would then sell call options with terms generally of a month or less. The premiums from those sales would fund the payouts. According to the filing, at least 80% of the funds' net assets would go into options tied to a Zcash exchange-traded product.

The filing mentioned that this setup comes with a tradeoff. If ZCSH rises above the strike price of the calls sold, the funds give up those gains. It still carries the full downside. It added that "high income" does not promise any set yield. Distributions will vary “and there is no assurance that any distribution level will be sustained” , said Grayscale. 

What Concerns Should Investors Know?

Grayscale described ZCSH and its alternatives as having "extremely limited" trade histories. An affiliate of Grayscale makes money from the sponsor fee on ZCSH, so that was also flagged as a conflict of interest. This means that when the proposed fund invests in ZCSH, it could bring in extra fees for Grayscale.

The report, however, didn't say anything about the exchange, fees, fund of funds, or sub-advisor. The filing itself stated that it will launch 75 days after it has been filed, unless it is amended or the SEC intervenes. If the process runs smoothly, the tentative launch date should be December 9, 2026.

ZEC’s price traded above $1500, down over 3% in the last 24 hours. On Stocktwits, the retail sentiment around ZEC dropped to ‘neutral’ zone from the ‘bullish’ zone, with chatter dipped to ‘low’ from ‘high’ levels over the past day.

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