Grayscale adjusts cryptocurrency fund composition, Avalanche removed from large-cap fund; BTC and ETH trusts traded at a significant discount, ETHE nearly -60%
The cryptocurrency asset management company Grayscale adjusted the components of its three comprehensive cryptocurrency index funds over the weekend, removing Avalanche from the list of large-cap funds, while Algorand lost in the battle against Ethereum’s competing public chains. Additionally, Grayscale's core products GBTC and ETHE are both facing historically high discounts, coupled with debt issues faced by its parent company DCG, causing concerns among Grayscale investors.
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Grayscale Composite Index Fund Component Adjustment, Avalanche Removed from Large Cap Fund
This time, the Grayscale adjusted index funds include the following three, with each fund's components and weights tracking the corresponding indices of CoinDesk Indices, with a management fee of 2.5%.
- Grayscale Digital Large Cap Fund, with the code GDLC
- Grayscale Smart Contract Platform Ex-Ethereum Fund, with the code GSCPxE
- Grayscale DeFi Fund, with the code DEFG
In this adjustment, AVAX was removed from GDLC, leaving only five mainstream tokens. Among them, BTC accounts for the highest at 65%, while ADA, SOL, and MATIC each account for less than 2%. The large cap fund has performed poorly in the bear market over the past year, falling by about 80%.
In GSCPxE, Algorand ALGO was removed from among many non-Ethereum smart contract public chains, with the remaining six public chains having similar proportions. Cardano has the largest share at 28%, while Cosmos has the smallest at 8.7%. This index has been issued for only 10 months and has fallen by 72%.
Finally, DEFG's composition added decentralized synthetic asset protocol Synthetix SNX, accounting for 6%. The fund's proportions vary greatly, with UNI accounting for 65%, while MKR, SNX, CRV, and COMP each account for less than 10%, falling by about 75% over the past year.
Grayscale Core Products GBTC and ETHE Discount Breaks New Lows
In addition to the aforementioned index funds, Grayscale's most well-known crypto products are the Bitcoin Trust GBTC and the Ethereum Trust ETHE, both of which hit historical new lows in discounts at the end of December last year, with GBTC reaching -48.5% and ETHE even more extreme at 59.62%.
To address the long-term discount issue, Grayscale has been pushing to convert GBTC into a Bitcoin spot ETF, but has been repeatedly rejected by the SEC, and the U.S. has yet to see any Bitcoin spot ETF.
In the face of the current situation, Grayscale CEO Michael Sonnenshein stated in his year-end letter to investors that if GBTC cannot ultimately be converted into an ETF, they may offer to repurchase 20% of the $10.7 billion trust fund issued, returning some capital to shareholders in this way.
Full article: No Light for GBTC Conversion to ETF, What Choices Remain for Grayscale?
Furthermore, although Sonnenshein has stated that Grayscale and its products are separate legal entities, Grayscale's parent company DCG and its subsidiary Genesis have billions of dollars in debt issues, causing many investors to worry about whether this will affect Grayscale's business or even lead to bankruptcy and liquidation.
The crypto community is closely following the developments of this event, as Grayscale holds 3.3% of the total BTC circulation and 2.5% of ETH. If the market faces such heavy selling pressure, it will inevitably drive prices to new lows.