Grayscale Joins Bitwise in Filing for a Standalone Aave Product in the US

Crypto Markets • ETFs • DeFi

Grayscale Joins Bitwise in Filing for a Standalone Aave Product in the US—A New Test of Wall Street’s Altcoin Appetite

Two heavyweight crypto managers are now competing to wrap Aave (AAVE) into a familiar, regulated package. The filings are a signal that the “spot BTC ETF era” didn’t just unlock bitcoin exposure—it also reopened the institutional conversation around select altcoins.

By TecTack Published February 16, 2026 Reading time ~12–15 minutes

Key takeaways

Grayscale filed to convert its Aave Trust into an ETF intended to list on NYSE Arca under ticker GAVE, with a 2.5% sponsor fee and Coinbase as custodian/prime broker.
Bitwise’s AAVE Strategy ETF is structurally different: it targets AAVE exposure via a mix of direct AAVE holdings, AAVE ETPs, and derivatives, with defined allocation rules.
This isn’t “altcoin mania” so much as “wrapper competition”: the fight is over who provides the cleanest regulated access, lowest friction custody, and best tracking.
The SEC path matters as much as the token: approvals, listing decisions, custody language, and surveillance narratives will shape whether AAVE products reach mainstream brokerage shelves.

What just happened

In February 2026, Grayscale joined Bitwise in filing paperwork aimed at bringing a standalone Aave (AAVE) investment product to US investors. The headline is simple: a recognizable crypto manager wants AAVE exposure to trade in a familiar wrapper. The subtext is more interesting: after the market’s big shift toward regulated crypto funds, issuers believe there’s still demand for curated altcoin exposure— but only if it comes in a structure that compliance teams and brokerage platforms can actually distribute.

Aave isn’t a meme token, and the pitch here isn’t “number go up.” It’s closer to: DeFi is now a durable segment; Aave is a flagship protocol; and regulated access beats self-custody for most institutional pipelines. Whether that pitch converts into approvals and assets is the story to watch.

The competitive frame

The core competition isn’t just Grayscale vs Bitwise. It’s also structure vs structure: a more spot-like “hold the asset” trust-to-ETF path versus a “strategy” fund that can blend direct holdings, ETPs, and derivatives. In the US, structure often determines distribution, and distribution determines AUM.

Why Aave is “ETF-worthy” (in issuer terms)

If you’re wondering why managers are choosing Aave specifically, start with positioning: Aave is one of the most recognized decentralized lending protocols in crypto. Its token, AAVE, is widely tracked, broadly listed on exchanges, and frequently used as a proxy for “blue-chip DeFi” in market narratives.

From an issuer’s perspective, AAVE has a few qualities that fit the regulated-wrapper playbook:

Recognizable category: decentralized lending/borrowing is a clean sector label compared with more experimental niches.
Market structure familiarity: deep liquidity across major venues improves the ability to track, price, and hedge.
Institutional storytelling: “DeFi infrastructure” is easier to explain to RIAs than “community token.”
Existing product lineage: Grayscale already operates an Aave trust, meaning the upgrade path is a natural next step rather than a brand-new leap.

None of that guarantees regulatory approval—nor does it eliminate Aave’s protocol risks—but it helps explain why AAVE is in the first wave of “altcoin wrapper” attempts rather than the twentieth.

Grayscale’s standalone Aave product

Grayscale’s angle is an extension of a familiar play: it already has a single-asset trust that offers AAVE exposure, and it now wants to push that vehicle into a more broadly tradable ETF structure. Public reporting around the filing describes an ETF intended to list on NYSE Arca under ticker GAVE, with a 2.5% sponsor fee and Coinbase serving key operational roles such as custody and prime broker functions.

Where Grayscale starts from

Grayscale launched an Aave fund in 2024, expanding its menu of single-asset crypto products beyond BTC/ETH and major smart contract networks. That early product gave institutions a way to gain AAVE exposure via a security wrapper while outsourcing token custody.

Where Grayscale wants to go

Converting a trust into an ETF is, in simple terms, a bid to make the exposure easier to trade, easier to distribute, and (depending on the mechanics) potentially better at tracking the underlying asset across market regimes.

Another detail that matters for product mechanics is pricing. Grayscale’s product pages explain that NAV per share is calculated daily at 4:00 pm ET based on a referenced index or reference rate, which is typical for single-asset crypto vehicles that rely on established benchmark data providers. That NAV convention is not the same thing as 24/7 continuous token trading—but it’s how regulated funds translate always-on markets into a daily workflow.

The “why now” logic

Conversions and new filings tend to cluster when issuers believe two conditions are true: (1) the regulatory door is at least partially open for crypto ETP structures, and (2) distribution channels are asking for more variety beyond BTC and ETH—especially as client portfolios start treating crypto as a “sleeve” rather than a single-asset bet.

Bitwise’s AAVE Strategy ETF

Bitwise’s approach is explicitly labeled “strategy,” and the structure is important. According to the SEC filing text, the fund expects to derive AAVE exposure via a defined mix: up to 60% directly in AAVE and at least 40% in “AAVE ETPs”—exchange-traded products that invest in or provide exposure to AAVE. It also allows for derivatives that reference AAVE or an AAVE ETP, and it includes an “80% policy” framework for what the fund holds under normal conditions.

Exposure channel	What it means in plain English	Why a manager might do it
Direct AAVE (up to 60%)	Actual AAVE tokens held by the fund.	Cleaner exposure and potentially tighter tracking—subject to custody and operational constraints.
AAVE ETPs (at least 40%)	Securities issued by exchange-traded products that hold or reference AAVE (often outside the US).	Access and operational flexibility; can be useful where direct holding is constrained or where the manager wants different settlement/market mechanics.
AAVE derivatives	Futures or swaps referencing AAVE or AAVE ETPs.	Implementation and risk management; can facilitate exposure when direct markets are limited.

The filing also makes a point that’s easy to miss but crucial for investors: the fund’s performance is not expected to perfectly replicate AAVE’s performance because not all exposure is direct; some is routed through ETPs and derivatives. The filing text goes further in describing ETP-specific risks such as default risk (as the fund may be holding debt securities issued by the ETP issuer rather than directly owning AAVE), liquidity constraints, and performance divergence.

Why “strategy ETF” is not just marketing language

A “strategy” structure can be a feature (more tools to implement exposure) or a bug (more layers between you and the token price). If you care about pure spot tracking, you should read the allocation rules and risk language carefully—because “AAVE exposure” can be built in very different ways.

Spot-style vs strategy-style exposure: what changes for investors

If you only remember one thing: “AAVE product” doesn’t automatically mean “spot AAVE.” The wrapper can shape everything: tracking quality, fees, tax handling, liquidity, and how the fund behaves in volatile markets.

Spot-style (hold the asset)

Goal: hold AAVE (or a defined amount per share) and reflect its price, less fees/expenses.
Potential advantage: cleaner linkage to spot market price.
Potential trade-off: custody, creation/redemption mechanics, and regulatory scrutiny over market surveillance and pricing.

Strategy-style (multi-instrument exposure)

Goal: deliver “AAVE exposure” via a blend of direct token holdings, ETPs, and derivatives.
Potential advantage: operational flexibility; can function even when parts of the market are constrained.
Potential trade-off: more basis risk and more ways for performance to drift from spot AAVE.

In the US, investors often default to “ETF equals spot.” But with crypto, an ETF label can cover a wide range of mechanics. For AAVE specifically, Bitwise’s SEC language is unusually direct about the layered approach and the expectation of performance divergence when exposure is routed through ETPs and derivatives. That’s not automatically bad—but it is a different product than a simple “hold AAVE” vehicle.

How the SEC approval path typically works (and why it can take time)

The regulatory pathway for a crypto-linked fund depends on the structure, the listing venue, and how the product is categorized under securities law. In practice, there are two recurring themes investors should internalize: (1) registration disclosure is only part of the process, and (2) listing and market-structure questions often become the battleground.

Step 1: The registration statement (the “what is this product?” document)

A registration statement (commonly an S-1 for certain products) tells the market what the fund intends to do—its fees, custody approach, valuation methodology, risk disclosures, and operational mechanics. This is the document investors can read to understand the product’s design and the sponsor’s commitments.

Step 2: The listing process (the “can this trade like an ETF?” question)

A separate track typically addresses whether and how the product can list on a given exchange and meet the standards for trading, surveillance, and investor protection. This is where crypto products can face a higher bar: the SEC’s historical skepticism has often focused on market integrity, pricing, and surveillance in underlying spot markets.

Step 3: The “details that decide distribution”

Even before a product is approved, advisors and platforms evaluate practical issues: fees, spread/liquidity expectations, premium/discount behavior, custody counterparty strength, and whether the wrapper cleanly fits a client portfolio policy statement. In other words, “approval” is not the finish line—it’s the start of a second competition for shelf space.

Is Wall Street really “back” for altcoins?

The honest answer: selectively, and conditionally. These filings don’t prove that institutions are eager to buy every altcoin. What they suggest is that issuers believe there is enough demand—among RIAs, wealth platforms, and crypto-curious allocators—for a small set of “category leaders” beyond BTC/ETH.

The strongest interpretation is not “Wall Street loves altcoins again.” It’s this: regulated packaging has become a product category of its own, and asset managers are racing to define the next shelf of exposures that can be sold and held in mainstream accounts—without forcing investors into self-custody or onchain workflows.

Why issuers keep filing even in choppy markets

First-mover advantage: the first approved product often becomes the default allocation vehicle.
Distribution momentum: wealth platforms like “simple” tickers; compliance teams like standardized disclosures.
Client segmentation: some allocators want BTC-only; others want “crypto beta”; a third group wants thematic exposure like DeFi.
Fee economics: new categories can be profitable early, before fee compression arrives.

Still, altcoin products face a harder narrative than BTC: Aave is a protocol token with governance and risk parameters that do not map cleanly onto equity-style valuation frameworks. If you’re an advisor, you’re not just selling “AAVE exposure”; you’re explaining why DeFi lending deserves a place next to stocks and bonds. That’s possible—but it requires more education, and it can limit the addressable market in the early innings.

Investor checklist: what to watch next

If you’re tracking these filings because you want to trade them, allocate to them, or simply understand where the market is heading, here’s a practical checklist that separates “headline noise” from “decision-grade information.”

Confirm the structure in the final documents. “ETF” can still mean different mechanics depending on whether the fund is spot-hold, strategy-based, or uses intermediated exposure.
Track fees and fee payment mechanics. High fees materially change long-term outcomes in volatile assets. Watch for any revisions as products move through the process.
Read the custody language. Who holds the AAVE? Under what security model? What happens operationally during market stress?
Watch for tracking error disclosures. Strategy funds frequently warn about performance divergence—especially if they rely on ETP debt securities or derivatives.
Liquidity expectations at launch. The first weeks of trading often determine whether a product becomes “the” vehicle or a niche footnote.
Timeline cues. Amendments, staff comments, and listing updates often matter more than press coverage.

A quick rule of thumb

If you want AAVE exposure with the smallest number of moving parts, you generally prefer the wrapper that holds AAVE more directly. If you want a fund that can use multiple instruments to maintain exposure under constraints, you might prefer a strategy structure—accepting the tracking trade-off.

Risks that matter: ETF mechanics + DeFi layers

There are two different risk stacks here, and investors often mix them up: (1) ETF/product-structure risks and (2) Aave/DeFi protocol risks. A regulated wrapper can reduce some operational burdens (like self-custody) while leaving the underlying economic and protocol risks intact.

1) Product and market-structure risk

Tracking error: especially relevant for strategy funds that route exposure through ETP securities and derivatives.
Liquidity gaps: ETFs trade during market hours; AAVE trades 24/7. Weekend moves can reprice at the open.
Counterparty layers: if exposure is via ETP debt securities, investors take issuer and structure risks distinct from holding AAVE directly.
Fee drag: high sponsor fees compound. Over multi-year horizons, fees can be the difference between “kept up” and “fell behind.”

2) DeFi protocol and token-specific risk

Smart contract risk: protocol vulnerabilities can impact confidence, usage, and token valuation.
Governance risk: parameter changes, risk framework adjustments, or governance attacks can materially affect outcomes.
Systemic DeFi risk: contagion events across DeFi can compress valuations and liquidity for the entire category.
Regulatory risk: evolving rules can reshape how DeFi tokens are treated by exchanges, platforms, and US market intermediaries.

Don’t confuse “regulated wrapper” with “regulated protocol”

An ETF can be regulated even if its underlying asset operates in a decentralized environment. The wrapper changes access and custody—but it does not guarantee the underlying system behaves like a traditional financial instrument.

Disclosure: This article is for informational purposes only and does not constitute investment advice. Crypto assets are volatile and may not be suitable for all investors.

FAQ

Is Grayscale’s filing the same as Bitwise’s AAVE Strategy ETF?

No. The publicly described Grayscale approach is framed as converting an existing Aave trust into an ETF, while Bitwise’s filing text describes a “strategy” ETF that can gain AAVE exposure through direct holdings, AAVE ETPs, and derivatives, with specific allocation rules.

Why would a fund hold AAVE ETPs instead of only holding AAVE?

Operational flexibility. The SEC filing language describes using ETP securities (often outside the US) as part of the exposure toolkit. That can help a manager implement exposure under constraints—but it introduces ETP-specific risks and the potential for performance divergence versus spot AAVE.

Does “ETF” mean it will track AAVE perfectly?

Not necessarily. A spot-hold structure may track more directly, but fees and market mechanics still matter. A strategy fund can explicitly warn that its performance may not replicate AAVE, depending on how exposure is constructed.

What’s the single most important detail to watch next?

The final, operative mechanics: custody, how shares are created/redeemed, which benchmarks are used for valuation, and any revisions to fee terms. Those details usually determine whether the product becomes a liquid “default” vehicle or stays niche.

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