Summary LTCN's spot ETF conversion is delayed, with SEC approval now expected by October, but the NAV discount has nearly vanished, reducing arbitrage appeal. Market sentiment for a Litecoin ETF is lukewarm, with minimal fund flows and low investor demand compared to Solana and Ethereum products. Despite strong odds for ETF approval, Litecoin lacks the narrative and capital inflows driving other digital assets, signaling limited near-term upside. I downgrade LTCN to 'hold' as upside from ETF conversion is minimal and market interest in Litecoin investment products remains weak. Back in April, I wrote about the Grayscale Litecoin Trust ( OTCQX:LTCN ) and liked the fund on the possibility of spot ETF conversion as early as May. Grayscale had previously applied to convert the fund to a spot ETF earlier in the year and ETF analysts have remained optimistic that the United States Securities and Exchange Commission would grant approval for such a product. One of the key issues for LTCN historically is that, as a closed-end fund, shares cannot be redeemed for the Litecoin ( LTC-USD ) that is underlying the fund. This is less of a problem when fund shares are in line with net asset value, or NAV. It can be quite frustrating when the shares trade at a large discount to their underlying value: LTCN Premium/Discount Rate (CoinGlass) Such was the case during the 'Crypto Winter' of 2022 when the fund briefly traded at a 65% discount to NAV. That proved to be an unbelievable buying opportunity as the shares were trading at a 400% premium 15 months later. We currently find the fund at a 0.5% discount to NAV. For me, this is not a compelling enough arbitrage to justify buying LTCN solely on expectations of a spot ETF conversion. The real question though might be this; does the market even want a spot Litecoin ETF? I'm not very convinced. Market Expectations for a spot ETF Obviously, the SEC did not approve the conversion of LTCN to ETF back in May. Prior to the agency's official delay disclosed on July 29th , August 11th was a deadline date for approval: The 180th day after publication of the proposed rule change is August 11, 2025. The Commission is extending the time period for approving or disapproving the proposed rule change for an additional 60 days. With the SEC now pushing the approval time period for another 60 days, October 10th is now the date that LTCN shareholders should be mindful of. LTC Daily Chart (TrendSpider) Given the recent 58% run up in the price of LTC from late-June to late-July, this delay in ETF approval could theoretically put pricing pressure on LTC and by extension LTCN over shorter term time horizons. That said, the market still expects Litecoin ETFs in the United States by the end of the year: Spot LTC ETF Odds (Polymarket) Bettors through prediction markets like Polymarket have LTC ETF approval odds this year at 82%. This is on an admittedly low betting volume of just $58k, but these markets have shown success in being able to price-in catalysts; especially when it comes to futures markets concerning politics or regulations. Investor Indifference The real question is does the market even really care about a LTC ETF should one be approved? I would posit that the biggest driver of 'adoption' in the Digital Asset ecosystem in 2025 is capital flows through investment products rather than any real utility offered by chain-native assets. On-chain usage of most of the large blockchain networks is actually down compared to previous cycle highs yet demand for products tied to the native assets of those chains has been robust - specifically for Bitcoin ( BTC-USD ) and more recently Ethereum ( ETH-USD ). Such has not been the case for Litecoin where fund flows were actually down month-to-date through July 26th: Asset (mil) MTD Flows YTD Flows AUM Bitcoin $5,474 $20,472 $179,819 Ethereum $4,907 $7,790 $28,314 Multi-asset -$70.5 $13 $7,109 Solana ( SOL-USD ) $551.5 $844 $2,473 XRP ( XRP-USD ) $311.7 $721 $2,255 Sui ( SUI-USD ) $22.5 $127 $349 Litecoin -$1.2 $4 $247 Source: CoinShares, as of July 26th Year-to-date flows into Litecoin investment products have only amounted to $4 million dollars and at just $247 million in AUM, Litecoin's total investment assets under management are actually lower than the month-to-date inflows of Solana - which is also potentially getting a spot ETF in the US market this year. This does not lend much confidence that there will be any real demand for LTC even if LTC ETFs hit the US market later this year. However, Ethereum's fund flow story was quite bad last July before the spot ETH ETFs were approved as well: Fund Flows in July 2024 (CoinShares) If we look at the fund flows into Ethereum back in July 2024, we can see the year to date flows were putrid prior to July. At just $103 million in year-to-date flows through July 20th 2024, the investment demand for ETH was about half of 1% of Bitcoin's prior to spot ETH approvals just a few days later. While July did indeed turn around what had been a negative fund flow story through the first half of 2024 for Ethereum, there is no such activity for Litecoin this time around despite the clear demand for Solana prior to presumed spot ETF approvals. Closing Thoughts None of this means Digital Asset investors should avoid Litecoin or even LTCN for that matter. Like Polymarket's bettors, I do think we'll see the fund converted to a spot ETF later this year. Fundamentally, the chain is still being used. We can see this through long-term trends in both daily active addresses and daily transactions. But the crypto market is not one that always rewards utility. Unlike Solana or Ethereum, there is no stablecoin angle that can propel LTC higher. I'm still personally long LTC-USD, but I'm downgrading LTCN to a 'hold.' The fund is trading essentially at NAV, which minimizes upside as a potential spot-ETF approval arbitrage. But more importantly, narratives and fundamentals only matter if the market cares. And right now, the market is showing very little interest in Litecoin investment products.
