Analysis: Winklevoss Asset Services files for Zcash ETF with 0.25% fee

Winklevoss Asset Services, the fund sponsor run by Cameron Winklevoss, filed with the SEC on Tuesday for the Winklevoss Zcash ETF. The filing is the second U.S. spot Zcash ETF filing. The proposed fund would hold ZEC directly and trade on Nasdaq under the ticker WINK. The filing proposes a 0.25% annual sponsor fee, accrued in ZEC. Affiliates of Winklevoss Capital indicated potential investment interest of up to $100 million, although the filing says those indications are not binding commitments.

Grayscale's Zcash ETF, which trades on NYSE under the ticker ZCSH, began trading on August 25. The fund gave U.S. investors their first exchange-traded vehicle for direct ZEC exposure. Zcash Treasuries data showed that ZCSH held 644,878 ZEC worth $977.4 million as of September 23. Zcash Treasuries data showed cumulative net primary-market inflows of $306.1 million. The established fund gives WINK an existing market to compete for rather than requiring WINK to create demand from the beginning.

ZCSH currently lists a 2.5% sponsor fee. WINK's proposed lower fee could start fee competition between Zcash ETFs. The fee difference is significant for investors holding the products over several years. WINK would have a marketing advantage if the fund launches with the proposed fee intact. However, ZCSH already has a sizeable asset base and the advantage of launching first.

More recent flows suggest that initial enthusiasm for ZCSH has cooled. Farside Investors data showed $81.2 million of outflows between September 28 and October 5. Farside Investors recorded $26.9 million of outflows on October 2. Farside Investors recorded $3.6 million of outflows on October 5. Farside Investors put cumulative net inflows at $225 million over the period the data provider tracked. WINK will need to compete for new investment and potentially for investors already exposed to Zcash through ZCSH.

According to data cited by 247WallSt, Zcash gained roughly 741% over the past year. Bitcoin declined about 30% over the same period, according to the cited data. Zcash has substantially outperformed much of the broader cryptocurrency market while institutional access to privacy-focused cryptocurrencies gains momentum.

Zcash uses zero-knowledge technology to allow transaction information to be shielded. The privacy-preserving transactions give ZEC a distinct investment rationale as demand for privacy-focused digital assets gains traction. U.S. spot cryptocurrency ETFs now provide exposure to a growing list of alternative cryptocurrencies beyond Bitcoin and Ethereum. WINK would extend that trend into the more controversial privacy-focused cryptocurrency sector.

The SEC rejected the Winklevoss brothers' proposal for the Winklevoss Bitcoin Trust in 2017, years before spot Bitcoin ETFs became available. The Zcash filing marks a return for the Winklevoss name to the cryptocurrency ETF market nearly a decade later. Whether Zcash's rally will translate into lasting institutional demand remains an open question. Whether a lower-cost competitor can capture meaningful market share from the first U.S. Zcash ETF also remains an open question.