For those not well versed in cryptocurrency terminology, “altcoin” refers to basically any digital coin that isn’t bitcoin. As in “alternative to bitcoin. ”
That’s expansive, growing territory because there are more than 9,500 digital currencies on the market today with more appearing on a daily basis. Experienced crypto investors know that the further down the market capitalization spectrum one goes, the more use cases and, arguably, credibility dwindle while risk increases.
However, not everything after bitcoin is a memecoin or lacking credibility. For example, ethereum, also known as ether, has a market value north of $540 billion and is widely available in exchange traded funds form. Point is not all cryptocurrencies are suspect, but finding the cream of the crop and avoiding dubious tokens isn’t effortless.
“Biggest” doesn’t always mean “best”, but in crypto that strategy can be an avenue for mitigating risk. The Grayscale CoinDesk Crypto 5 ETF (ticker: GDLC) is a new tool for advisors and crypto-enthused investors to consider as they focus on sturdier cryptocurrency fare.
GDLC Has the Goods
First, housekeeping item. In the headline “new” is in quotes because as an exchange traded product, GDLC is new. It debuted last week, but it another fund form, it came to market in February 2018, hence it’s more than $931 million in assets under management.
As its name implies, GDLC provides exposure to five digital currencies: Bitcoin, Ether, XRP, Solana and Cardano. The first three are the top three by market cap while Solana and Cardano rank sixth and tenth, respectively, by that metric. Two of the other top 10 are stablecoins, meaning they don’t make for sensible inclusions in a product like GDLC.
What the new Grayscale ETF is an accurate, efficient representation of the large-cap crypto segment and one that removes the burden of selecting individual assets. On that note, Bitcoin and Ether combine for more than 89% of the fund’s roster and while that sounds top-heavy, it’s an accurate approximation of how the crypto cookie currently crumbles.
“Through broad exposure to crypto ‘large caps,’ we believe GDLC delivers a more wholistic exposure to the asset class and can help investors access the crypto market's potential beyond any individual cryptocurrency,” according to Grayscale.
It’s also worth pointing out that GDLC is passively managed – it follows the CoinDesk 5 Index – and the fund is rebalanced quarterly with a focus on limiting turnover.
“CoinDesk 5 comprises the five largest assets of the CoinDesk 20 Index. CoinDesk 20 constituents are subject to certain exclusions and are selected using liquidity and size filters,” according to the index provider.
GDLC Is a “Breakthrough” ETF
Advisors and fund industry observers know that hardly a day passes without a new ETF of some form coming to market. In fact, nearly every year brings more ETF launches than there are days in a year. Translation: the words “breakthrough” and “standout” shouldn’t be applied too liberally regarding rookie ETFs.
However, GDLC fits the bill as a breakthrough because it confirms that the current regulatory regime is open to allowing other cryptos beyond the “big two” to come to life in ETF form. XRP and Dogecoin (not a GDLC holding) ETFs are already here and GDLC’s approval and debut could indicate it’s a just a matter of time before spot Solana ETFs join the party.
Bottom line: GDLC could be the ETF, or one of them, that opens doors for other digital currencies to come to life via the ETF wrapper.
