The first AI coin ETF is here! Grayscale applies for Bittensor ETF to challenge Bitcoin

Grayscale files Bittensor Trust (TAO) registration statement with the SEC, marking the first U.S. launch of a Bittensor spot ETF. The product will be traded on NYSE Arca under the ticker GTAO, custodized by the largest compliant crypto exchange in the United States. This application comes just weeks after Bittensor’s first halving in mid-December, with TAO currently stable at around $222.

Timing of ETF Application Immediately After Halving Sparks Attention

Bittensor’s halving occurred in mid-December, reducing the issuance rate of new TAO tokens on the network, similar to Bitcoin’s halving events. Bitcoin halvings happen approximately every four years, and as a relatively young network, Bittensor has just experienced its first halving. This supply reduction mechanism is widely viewed in the crypto space as a bullish catalyst, as it decreases new supply while demand remains unchanged.

Grayscale’s decision to submit the Bittensor ETF application just weeks after the halving is no coincidence. Historically, Bitcoin tends to enter long-term bull cycles following halvings, despite short-term price corrections. TAO’s price dipped after the halving but has now stabilized at about $222, according to The Block’s price page. This stability may provide a more favorable regulatory environment for the ETF application.

More importantly, the supply mechanism change post-halving makes TAO’s economic model more mature and predictable. For the SEC, assessing an ETF application involves considering the market maturity and price stability of the underlying asset. Bittensor’s completion of its first halving and demonstrated price stability could enhance regulators’ confidence in the asset as an ETF underlying.

AI Track and Decentralized Computing Dual Narrative

TAO is Bittensor’s native token. Bittensor is a decentralized AI-focused network built on a hub-and-spoke blockchain architecture supporting subnetworks for specific applications. Participants earn TAO by contributing computing resources, which help improve and support these AI-driven networks.

This model has unique appeal amid the current AI boom. Traditional AI models rely on centralized cloud computing resources, whereas Bittensor offers a decentralized alternative. As demand for computing power in AI applications explodes, decentralized computing networks could become an important supplement. Participants are incentivized to contribute GPU and other computing resources in exchange for TAO rewards, forming a mutually beneficial economic model.

Three Unique Selling Points of the Bittensor ETF

AI Track Narrative: The first blockchain ETF focused on AI infrastructure, targeting the hottest market theme

Decentralized Computing: Providing distributed computing resources for training and running AI models, contrasting with centralized cloud services

Subnet Architecture Innovation: Supporting application-specific subnetworks, allowing optimization for different AI tasks

From an investment perspective, the Bittensor ETF offers institutional and individual investors a tool to simultaneously position themselves in the two major trends of AI and blockchain. This dual narrative could attract a broader investor base than traditional crypto ETFs.

Grayscale ETF Expansion and Altcoin Strategy

Grayscale manages some of the largest ETFs tracking major cryptocurrencies like Bitcoin and Ethereum, and over the past year has converted several altcoin trust funds into ETFs. For example, the recently launched Grayscale LINK fund became the first Chainlink ETF on the market. This indicates Grayscale is actively expanding its ETF lineup, extending from mainstream coins to more functional altcoins.

Since early 2024, the Grayscale Bittensor Trust, which had been private, was opened to a broader investor base through public trading at the beginning of this month. This phased approach—initially establishing a private trust, then transitioning to public trading, and finally applying for an ETF—is typical for Grayscale. It reduces regulatory risk while accumulating operational data for the product.

NYSE Arca Listing and Regulatory Review Path

Grayscale’s Bittensor ETF will be traded on NYSE Arca under the ticker GTAO. NYSE Arca is a leading U.S. ETF trading platform that has already custody several of Grayscale’s crypto ETF products. Choosing NYSE Arca over Nasdaq or other exchanges indicates Grayscale aims to leverage its existing relationships and experience on that platform.

However, the SEC’s review of crypto ETFs has historically been strict. While spot Bitcoin and Ethereum ETFs have been approved, altcoin ETFs face higher hurdles. The SEC’s main concerns include market maturity of the underlying assets, manipulation risks, custody security, and investor protection mechanisms. As a relatively new project, whether Bittensor’s market depth and trading volume are sufficient to support an ETF will be a key focus of SEC evaluation.

A Grayscale spokesperson stated: “We are pleased to take this step, and we will continue to expand the tools available to investors and further develop Grayscale’s product platform to meet the growing demand for digital asset exposure.” This cautious optimism reflects that while the application has been submitted, approval will still require time and regulatory approval.