Grayscale launches diversified DeFi fund and index

The fund aims to provide eligible individual and institutional accredited investors with exposure to DeFi assets

Grayscale – the world’s largest crypto asset manager with more than $40 billion in assets – has announced the launch of the Grayscale Decentralised Finance (DeFi) Fund, a new diversified investment product, and the CoinDesk DeFi Index. 

The fund provides investors with exposure to a selection of industry-leading DeFi protocols through a market-cap weighted portfolio designed to track the CoinDesk DeFi Index. 

It is Grayscale’s fifteenth investment product and its second diversified fund offering to sit alongside its Digital Large Cap Fund (GDLC). Both Grayscale and CoinDesk are subsidiaries of Digital Currency Group, which was launched in 2015 by CEO Barry Silbert.

The launch of the new fund and index reflects the increasing investor interest in DeFi protocols and the growing desire to participate and contribute towards the DeFi space. DeFi has seen rampant growth and adoption in recent months and remains the fastest-growing space in the crypto industry. According to DeFi Pulse, the total locked value of all assets in the DeFi space currently sits around $53bn.

The CEO of Grayscale, Michael Sonnenshein, remains bullish on the potential of DeFi and looks to be capitalising on the furore surrounding the space.

“Grayscale continues to focus on creating opportunities for investors to access new, exciting parts of the digital asset ecosystem,” he said. 

“The emergence of decentralised finance protocols provide clear examples of technologies that can redefine the future of the financial services industry. We’re proud to offer investors exposure to DeFi through Grayscale’s trusted, secure, and industry-leading investment product structures.” 

Jack Dorsey’s Square has also been getting involved in the DeFi space recently. Square announced plans to create a new business focused on making an “open developer platform” to provide non-custodial, decentralised financial services.

CoinDesk Indexes are a range of institutional single and multi-asset benchmarks for crypto assets. CoinDesk Indexes products track various assets and are the industry standard for financial institutions that track assets under management.

The CoinDesk DeFi Index (DFX) aims to provide a broad-based, benchmark representation of DeFi protocols. The Index methodology includes liquid DeFi assets on a market cap-weighted basis. According to Coindesk, the fund “is composed of assets suitable for long-term holding” and “based on their measured liquidity, their support by reliable service providers and their longevity among the most-valued crypto assets”. 

As of July 1 2021, the fund was comprised of the following assets and weightings:

  • Uniswap (UNI), 49.95%
  • Aave (AAVE), 10.25%
  • Compound (COMP), 8.38%
  • Curve (CRV), 7.44%
  • MakerDAO (MKR), 6.49%
  • SushiSwap (SUSHI), 4.83%
  • Synthetix (SNX), 4.43%
  • Yearn Finance (YFI), 3.31%
  • UMA Protocol (UMA), 2.93%
  • Bancor Network Token (BNT), 2.00%

“This partnership underscores our leadership in creating institutional-grade digital currency indexes,” said Managing Director of CoinDesk Indexes Jodie Gunzberg. 

“With increasing attention on the innovations within decentralised finance, it’s critical for the investment community to have tools that deliver calculated exposure to this exciting area of innovation. This collaboration offers investors the data and tools they need to gain exposure to decentralised finance into their portfolios.”

The Fund is now open for daily subscription by eligible individual and institutional accredited investors. 

Grayscale has been scaling its fund options and its investment products to match the current demand following the surge in institutional interest. In June, it added 13 assets to the list under consideration and have been vocal about the pursuit of a regulated Bitcoin ETF product.

Its Digital Large Cap Fund (GDLC) recently became an SEC-registered entity and announced a partnership with BNY Mellon to prepare for an expected Bitcoin ETF in October. In a recent interview, Sonneshein tweeted “A #bitcoin ETF here in the US is really a matter of when, not a matter of if”, raising the expectations of investors hoping to invest in a Bitcoin ETF product.

The news also follows the much-anticipated unlock of shares of the Grayscale Bitcoin Trust. The six month lock-up period for shares expired over the weekend and it’s speculated that investors who bought GBTC during the January tranche will take profit on their shares over the next week. The Grayscale Bitcoin Trust is the world’s largest crypto-asset fund, holding more than 650,000 Bitcoin (BTC) – accounting for around 3% of Bitcoin’s total supply.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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