(Kitco News) - Grayscale Investments, the world’s largest digital currency asset manager, has announced that its decentralized finance (DeFi) focused fund is now accessible to public investors via OTC Markets Group.
The Grayscale Decentralized Finance Fund (DeFi Fund) began trading on OTC Markets under the symbol DEFG on Friday, making it the 15th digital currency investment product released by Grasycalse that trades on OTC Markets.
DEFG tracks the CoinDesk DeFi Select Index (DFX), providing investors with exposure to a basket of the top DeFi assets in one investment vehicle. It is rebalanced quarterly, which allows investors “to avoid the challenges of buying, storing, and safekeeping digital currencies directly.”
Following its most recent rebalancing, DEFG is now comprised of 68.88% Uniswap (UNI), 13.00% Aave (AVE), 8.89% Maker (MKR), 5.14% Curve (CRV) and 4.09% Compound (COMP).
According to the announcement from Grayscale, “The protocols underlying DEFG digital assets seek to democratize access to financial services, such as borrowing, lending, custody, trading, derivatives, asset management and insurance, by removing third-party intermediaries.”
The goal of the fund is for its shares to “reflect the value of the Fund Components, determined by reference to the Digital Asset Reference Rate and weighting for each Fund Component less DEFG’s expenses and other liabilities,” the press release said.
DEFG is not registered with the Securities and Exchange Commission and is not subject to disclosure and certain other requirements mandated by U.S. securities laws.
Previously, DEFG was offered via private placement to accredited investors, and as of Dec. 8, 2022, there were 233,960 shares outstanding of DEFG. Following its listing on OTC Markets, all investors with access to U.S. securities are now able to buy and sell freely-tradable DEFG shares through their investment accounts, in the same manner as other securities.
“We believe that investors deserve access to the digital currency ecosystem through secure products, and are excited to now offer them exposure to the evolving decentralized finance sub-sector through a publicly-quoted security,” said Grayscale Head of Investor Solutions, Rayhaneh Sharif-Askary.
Ongoing struggles at Grayscale
The launch of DEFG to the public comes at a time when the majority of Grayscale’s products are struggling to gain traction amid the depths of the crypto winter.
On Friday, the Grayscale Bitcoin Trust (GBTC) hit a record-low discount of 47.84% according to data from CoinGlass. Out of the fourteen individual Grayscale funds tracked by CoinGlass, seven of them currently have a discount between 41.41% and 69.07%, including the Bitcoin Trust, Ethereum Trust, Ethereum Classic Trust, Litecoin Trust, Bitcoin Cash Trust, Zcash Trust, and Livepeer Trust.
The weakness in the various Grayscale products, especially GBTC, has been a cause of concern for the crypto community as a whole, with many speculating that the asset manager could be the next victim of the FTX contagion.
|
| Ark Invest adds $2.8 million of GBTC to its balance sheet |
According to Bradley Duke, Co-CEO at crypto exchange-traded product (ETP) provider ETC Group, “The fact that Grayscale’s Bitcoin Trust is now trading at nearly 50% discount is just awful for holders of GBTC. It really highlights the vast differences in structure quality between different investment vehicles.”
Duke was referring to the exchange-traded commodity (ETC) structure available in Europe, “which was first developed for investments in gold, but is very well suited to Bitcoin and other cryptocurrencies.”
Grayscale’s products have long been maligned due to the way they are structured. They essentially act like closed-end funds, which have no flexibility to create or redeem shares. A Bitcoin ETF or ETC, on the other hand, would offer greater flexibility.
“Because these securities are fully backed by the underlying bitcoin and fully fungible, it means ETC securities like BTCE will never trade at a large premium or discount, because any deviation from fair value would provide an attractive arbitrage opportunity and correct pricing would be quickly restored,” Duke said. “This is not possible with Grayscale’s GBTC as in-kind redemption is not supported by the private placement trust structure.”
For now, it remains to be seen what will help the various Grayscale products get back into the green. Things are unlikely to improve until conditions in the wider crypto market get significantly better, which could potentially take years. The Bitcoin halving has historically helped kick off a bull market for cryptos, but the next halving is not expected to take place until April 13, 2024, according to data from CoinWarz.
