Grayscale Wins Approval for First Public Digital Currency Index Fund

Grayscale Investments has received regulatory approval to list what it calls the first publicly-traded digital currency index fund.

Following assent from the Financial Industry Regulatory Authority (FINRA), the Digital Large Cap Fund (DLC) will be listed on over-the-counter markets and trade under the initials GDLCF. 

The DLC is Grayscale’s fourth publicly-quoted investment product, after Bitcoin Trust (OTCQX: GBTC), Ethereum Trust (OTCQX: ETHE), and Ethereum Classic Trust (OTCQX: ETCG). Eventually, Grayscale aims to list on the public market all ten of its investment products that are currently open to accredited investors. The new product is available to all investors with access to U.S. securities. 

“The bitcoin trust is one of the most liquid securities on OTCQX market daily,” Grayscale managing director Michael Sonnenshein told CoinDesk.

“To our knowledge, this is the first diversified digital currency offering going on the U.S. public market.”

The idea behind the DLC is to give investors broad-based exposure to cryptocurrencies with one vehicle, Sonnenshein said. The fund has seen a 74.8 percent return, year-to-date.

The DLC exposes investors to the largest cryptocurrencies based on market capitalization at any time. The fund targets upwards of 70 percent of the digital currency market. As of Sept. 30, 2019, that was 80.3 percent bitcoin, 9.9 percent ethereum, 5.8 percent XRP, 2.2 percent bitcoin cash and 1.8 percent litecoin. To account for changes in cryptocurrency market caps, the fund components are rebalanced on a quarterly basis, potentially removing existing digital assets and adding new assets. The fund is a passive investment vehicle that is not actively managed.

In addition to market cap, other factors like liquidity, operational requirements, and the availability of custodial solutions are considered when picking cryptocurrencies for the fund.

Grayscale, the oldest and largest digital currency asset manager with $2.2 billion assets under management, opened the funds to accredited investors in Feb 2018. There were about 3.2 million shares of DLC outstanding as of Sept. 30, 2019.

Investors buy shares in the private placement investment vehicle, which is backed by actual cryptocurrency. The valuation, made at 4:00 p.m. EST. each day, is based on the Digital Asset Reference Rate provided by institutional trading technology firm, TradeBlock.

Michael Sonnenshein image via CoinDesk archives.