The October Flush Is Over: Grayscale Says Deleveraging No Longer Pressuring Crypto Valuations

Regulatory scrutiny continues to shape the cryptocurrency landscape. The U.S. Securities and Exchange Commission (SEC) has delayed decisions on several crypto ETF proposals, including the Canary Pudgy Penguins (PENGU) and T. Rowe Price Active Crypto ETFs. These delays reflect the agency's ongoing evaluation of market structure and investor protection concerns.

Grayscale has also filed for options on its CoinDesk Crypto 5 ETF, which tracks a basket of major digital assets. The proposal has now entered the public comment phase, where stakeholders can evaluate its consistency with market fairness and fraud prevention standards.

The broader institutional adoption of crypto is gaining momentum. Digital Asset Treasury (DAT) deployed $49 billion into digital assets in 2024, bringing its total holdings to $134 billion by January 1, 2025. This massive investment reflects growing institutional confidence in cryptocurrencies as a legitimate asset class.

Why Did the SEC Delay These ETFs?

The SEC's delays do not signal final rejection of the ETFs but indicate a cautious approach to assessing products that extend beyond traditional crypto exposure. The PENGU ETF, which provides access to the Pudgy Penguins NFT ecosystem, represents an unconventional investment vehicle.

The T. Rowe Price Active Crypto ETF, an actively managed fund, also faces a delay. It aims to offer exposure to a diversified basket of digital assets, beyond just Bitcoin and Ether.

These delays highlight the SEC's broader scrutiny of how digital assets are structured and traded, especially when they involve newer categories like NFTs or multi-asset baskets.

What Are Analysts Watching Next?

Analysts are closely following the regulatory and market developments that could influence institutional adoption. Galaxy Digital, for example, has seen a rally in its stock, reflecting broader crypto activity rather than a stabilized earnings base.

Despite growing assets under management and staking, Galaxy's earnings remain volatile and heavily dependent on broader market conditions. Its Helios data center project is expected to contribute to earnings only in the first half of 2026.

Morgan Stanley recently joined the institutional crypto fray by filing for a Bitcoin ETF. This move signals a shift toward embedding crypto into traditional financial infrastructure, with implications for wealth management and institutional adoption.

How Is the Market Responding to Institutional Inflows?

Market participants are reacting to growing institutional interest in digital assets. Bitcoin and Ethereum prices have held key support levels, reflecting waning retail demand but continued institutional participation.

JPMorgan has forecast that crypto inflows could exceed $130 billion in 2026. This projection is based on expected regulatory clarity and increased institutional engagement in areas like venture capital and tokenized collateral.

The broader institutional appetite for crypto is also evident in the expansion of platforms like GalaxyOne and Coinbase's foray into stock trading.

What Does This Mean for Crypto Derivatives?

The proposed options on Grayscale's CoinDesk Crypto 5 ETF could expand the derivatives ecosystem beyond Bitcoin and Ether. If approved, these options will offer new tools for hedging and leveraged exposure to a diversified basket of digital assets.

Market participants will be watching closely to see whether the SEC approves these options and how they are received by traders and investors. The outcome could shape future product development in the crypto derivatives space.

The evolving regulatory landscape and institutional participation are key factors shaping the future of digital assets. With major banks and asset managers increasing their exposure, crypto is moving closer to mainstream acceptance.