Grayscale Diversifies Products With Cryptocurrency Basket Fund
Barry Silbert, CEO of Digital Currency Group (DCG) announced last week at the Yahoo Finance All Markets Summit that its asset management business arm, Grayscale, has launched its 4th cryptocurrency investment product, the Digital Large Cap Fund, compromised of a basket of 5 cryptocurrencies – Bitcoin, Ethereum, Ripple, Bitcoin Cash and Litecoin.
The Digital Large Cap Fund (DLC) started off on 1 February with $4Mn in Assets under Management (AuM). In comparison, Grayscale launched its Ethereum Classic Investment Trust, and the ZCash Investment Trust with $10Mn and $15Mn respectively last year. Both of which have made dream returns for accredited and institutional investor who have used Grayscale as a conduit to the cryptocurrency markets.
The name of the fund implies that the underlying cryptocurrencies will aim to represent 70% of all digital assets traded on the market (see chart 1). And Grayscale will remove or add assets every quarter to meet this target level. The current chosen cryptocurrencies, Bitcoin, Ethereum, Ripple, Bitcoin Cash and Litecoin, have maintained their status in the Top 10 for the better part of 2017 and have consistently been at this target for the last few months.
|| BETTING ON BITCOIN
On 1 February 2018, the total AuM across all of Grayscales investment funds totalled an impressive $1.763Bn. And over 93% of that was in Bitcoin alone. The four new cryptocurrencies added to the Digital Large Cap however, represent only 0.12% of the total AuM across all of the firms’ funds (see chart 2).
The basket of cryptocurrencies will be heavily weighted with Bitcoin and Ethereum – a total of 79.1% of the total AuM of the fund while Ripple, Bitcoin Cash and Litecoin will only account for 20.9% (see chart 3).
|| SIZE DOESN'T MATTER
But regardless of size, the fund could very well perform in grand fashion. Diar number crunching of historical prices shows that had the DLC Fund started alongside the ZCash fund, only a few months ago towards the end of October 2017, the basket Fund would have actually outperformed all of Grayscale products. A 3-Month hypothetical return at the start of February would have been a whopping 163% return, albeit a downturn in the cryptocurrency markets since Mid-January. And the funds AuM would be close to 3 times its inception value.
While Grayscale views Bitcoin as digital gold, Ethereum Classic as the platform that could drive the Internet of Things (IoT) and ZCash as a privacy coin that could potentially be the next offshore wealth haven, the DLC seems to address a growing demand in the cryptocurrency markets. Michael Sonnenshein, Managing Director of Grayscale tells Diar that “the goal with DLC is to provide investors with a singular investment that gives them broad market exposure."
1: Grayscale Digital Large Cap Fund Targeting 70% Market Cap (%)
2: Grayscale AuM Across All Funds on 1 Feb 2018 (USD)
3: Grayscale Digital Large Cap Fund Composition ($4Mn)
Note: BCH – 6.8%, LTC – 2.5%
4: *DLC Fund Hypothetical 3-Month Return (1-Nov-17 – 1-Feb-18) (%)
|GBTC||ETC Trust||ZEC Trust||DLC Fund*|
Note: *Assuming DLC Fund Started Same Date As ZEC Trust.
Sources: Grayscale, Diar, CoinMarketCap
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