Grayscale Just Launched the First-Ever ETF for Zcash (ZEC). Here's Why That's Big News for Crypto Investors.

There are nearly 8,100 digital currencies on the market today, but among those that make the cut as legitimate additions to the world of exchange-traded funds (ETFs), the universe is much, much smaller.

One way of looking at that scenario is that now, more than two-and-a-half years since the first spot Bitcoin (CRYPTO: BTC) ETFs came to market in the U.S., it's still kind of a big deal when new spot crypto ETFs appear. It's all the more meaningful when considering that some large fund sponsors won't expand their crypto ETF lineups beyond Bitcoin and Ethereum (CRYPTO: ETH), the two largest digital currencies by market capitalization.

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So yes, it's big news that Grayscale recently launched the Grayscale Zcash ETF (NYSEMKT: ZCSH). OK, this isn't an ETF launch in the traditional sense of the term because the issuer converted a previously existing trust into the wrapper. Hence, the new ETF came to market with $260 million in assets under management (it's up to $313 millionas of Aug. 28), but that only scratches the surface of this rookie fund's potential significance.

By market value, Zcash (CRYPTO: ZEC) is the 11th-largest cryptocurrency. That's not so far down the totem pole as to make this ETF a stretch. It is, however, the first ETF dedicated to this digital asset, making it the first ETF to focus on a privacy-dedicated token.

For crypto investors, the debut of a Zcash ETF is significant beyond Grayscale's status as a first-mover fund (more on that later). Interestingly, the Grayscale ETF debuted a few weeks after the now-infamous Coldcard Hack. Yes, that involved Bitcoin theft, but some experts believe that event could spur more adoption of ETFs as preferred avenues for crypto exposure, because many market participants don't want the burden of figuring out how to store cryptocurrency.

That's one potential demand driver for this infant ETF. Another is the familiarity of the ETF wrapper, which could stoke curiosity about Zcash. Inquisitive investors mulling over the Grayscale ETF may learn that nearly a third of the Zcash supply is held in shielded addresses, many of which are long-term devotees of the token.

Curious investors may also learn that, like Bitcoin, Zcash's supply is capped at 21 million tokens. That's pertinent to crypto market participants because, assuming the Zcash ETF continues to haul in assets, those inflows effectively remove Zcash supply from the market, potentially boosting prices in the process. Call it the "Bitcoin ETF effect."