Grayscale – a popular cryptocurrency asset manager – has now launched the Grayscale Smart Contract Platform Ex-Ethereum Fund. The fund includes exposure to a variety of cryptocurrencies that power major smart contract networks besides Ethereum.
Investing in Smart Contracts
As announced by Grayscale in a press release on Tuesday, the fund marks the firm’s 18th investment product, and third diversified fund offering. It adjusts its exposure to various cryptocurrencies using CoinDesk’s market cap-weighted Smart Contract Platform Select Ex ETH Index.
As of March 16th, the fund consisted of 24.6% ADA, 24.27% SOL, 16.96% AVAX, 16.16% DOT, 9.65% MATIC, 4.27% ALGO, and 4.06% XLM. This was based on the performance of each cryptocurrency at the time, though BNB and LUNA are notably absent.
“Smart Contract Platforms” are blockchains on which users can create open-source, self-executing code to power more creative, trustless transactions. This allows for a variety of decentralized applications (DApps) to be built on crypto networks, a popular subset of which includes decentralized finance (DeFi).
However, smart contracts may also make users more susceptible to hacks and exploits, while taking up more space on the blockchain. Some networks – including Bitcoin and Dogecoin – are not easily programmable for smart contracts.
A Diversified Product
Regarding the fund, Grayscale CEO Michael Sonnenshein said that as crypto grows, more investors are seeking diversified exposure to the crypto market.
“Smart contract technology is critical to the growth of the digital economy, but it’s still too early to know which platform will win,” he stated. “The beauty of [the fund] is that investors do not have to choose one winner, and instead can access the development of the smart contract platform ecosystem through a singular investment vehicle.”
TV personality and businessman Kevin O’Leary has also stressed the importance of diversification in crypto. He now has 20% of his wealth invested in 32 different positions across the market, including Ethereum, Solana, and Avalanche.
It’s worth noting that cryptocurrencies remain very tightly correlated in price, making the benefits of diversification limited right now. For example, CoinMetrics currently measures a correlation of 0.89 between BTC and ETH.
Grayscale’s other products include its Bitcoin Trust, which comprises the largest Bitcoin fund in the world. It has attempted to convert this fund into a US-based spot ETF, but is yet to be approved by the SEC.