Grayscale Funds Explore Altcoins, DeFi Assets
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Grayscale, the creator of crypto-derived investment vehicles, is looking into a new batch of altcoins, which include DeFi assets. The fund, which brings digital coins to mainstream investors, is paying more attention to the Ethereum ecosystem and its potential to accumulate value.
Grayscale announced it is exploring a long list of assets, with no binding intention. The list includes the native assets of DeFi staples like Uniswap and Curve Finance. The fund is also looking into the newly emerged asset Internet Computer (ICP), one of the projects with extremely fast exchange adoption despite its relatively short trading history.
Grayscale still relies on GBTC as its largest Bitcoin-derived fund. However, the current price per share means the fund trades at a discount compared to BTC spot trading. As of June 18, the GBTC market price on the OTC market dropped to $31.26, while BTC prices hovered around $37,611.
The Grayscale ETHE trust based on Ethereum also trades at a discount, equivalent to an ETH price of around $2,200 while the actual asset traded above $2,300.
Altcoin Market Loses Momentum
The announcement of potential altcoin additions arrives at a time when Bitcoin is re-establishing its dominance, while smaller assets slide. The BTC market cap dominance recovered to 40% after almost crashing below the 40% range.
The overall dominance of all altcoins is down to around 17% from a recent peak above 22%. While 2021 arrived with a strong altcoin season, there are still different categories of altcoins with varying performance levels. Until recently, Grayscale relied mostly on older, large-cap altcoins with no specific use cases. DeFi coins are a different category, relying on their respective communities for price growth and adoption.
DeFi Helps Markets Recover
The DeFi market based on Ethereum locks in around $58B in value. The collective value of DeFi tokens dropped to $83B based on Coinmarketcap data, down from a recent peak above $125B.
The DeFi market, however, is viewed as a tool to preserve value and achieve returns while keeping funds flowing within the cryptocurrency market. DeFi and liquidity pools lock in ETH, BNB and various tokens, discouraging short-term attempts to cash out.
Native DeFi tokens remain relatively risky, as rapid price changes for ETH lead to unexpected liquidations. But Grayscale also voted confidence on DeFi, by adding projects like Polygon, Maker and other ETH-based decentralized financial organizations.
Grayscale Expands Access for US Buyers
The list under consideration includes assets like Monero (XMR), which has been viewed with skepticism due to their potential for anonymous transactions. XMR transfers, however, can be made traceable and accessible to mainstream investors.
While there is no possibility to predict which assets will be added, the Grayscale move puts a wider scope on a selection of altcoins. The fund is also looking at assets like EOS and Tezos, which are currently lagging in terms of DeFi adoption.
GBTC Funds Drive New Spot Purchases
One of the bullish effects of Grayscale for the Bitcoin market is the requirement to hold a certain amount of BTC. Grayscale has been one of the big buyers of coins, with the potential for long-term holding.
Grayscale currently holds more than 651,000 BTC, though its exact wallet addresses remain unknown. This amount exceeds the holdings of even some of the largest exchanges. Grayscale continues to drive the scarcity, as less coins are available for spot purchase.
BTC Braces for Big Grayscale Unlocking Event
Despite its interest in altcoins, Grayscale is considered the most influential when it comes to the BTC market. Buying into the GBTC fund is not always open, and the next few days will give access to one of the largest tranches of BTC.
The scheduled unlocking may affect prices, as it opens significant BTC holdings to both retail and institutional investors. The GBTC, however, still holds the actual coins in its vaults, instead distributing GBTC shares.
Despite this, Grayscale may in fact quench some of the demand for BTC, even selling at a discount of around 11%.
The unlocking events may lead to additional volatility for BTC, as the leading coin faces price pressures around the $37,000 level. In the longer term, however, the influence of Grayscale may boost the price of BTC, especially after the GBTC access period ends. According to observers, Grayscale continues to drive demand for spot BTC, also buying the recent dip toward $31,000.
Grayscale also has indirect exposure to DeFi through Ethereum, which has been accumulating in its wallets for years. But for now, Grayscale’s ETH stash is relatively smaller in comparison to the ETH locked in Maker, Curve and other DeFi protocols, as well as smaller liquidity pairs.
For now, it is uncertain if Grayscale will have the same effect on altcoins as it has on BTC, since it will only hold a small fraction of the supply.
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