Grayscale Unveils DeFi Fund Linked to New CoinDesk Index

Grayscale, the largest cryptocurrency investment manager, said Monday it has started a fund focused on decentralized finance (DeFi) tokens, based on a new DeFi-specific index produced by CoinDesk’s TradeBlock division.

The companies, both subsidiaries of CoinDesk parent Digital Currency Group (DCG), wrote in a joint press release the Grayscale DeFi Fund provides “exposure to a selection of industry-leading DeFi protocols through a market-capitalization weighted portfolio.” The idea is that investors can allocate money toward DeFi without having to buy the tokens directly.

DeFi, which consists of blockchain-based software protocols designed for the trading and lending of cryptocurrencies, is one of the fastest-growing segments of the digital-asset industry. The amount of collateral locked into the protocols has increased 19-fold over the past year to about $50 billion, and prices for many of the platforms’ associated tokens have soared.

"Based on the user adoption that we're seeing around DeFi and DeFi protocols, we do think the future of this area is bright," Grayscale CEO Michael Sonnenshein said in an interview Monday on CoinDesk TV's First Mover program.

The fund is only open to “eligible individual and institutional accredited investors,” according to the press release. Grayscale said it “intends to attempt to have shares of this new product quoted on a secondary market” but added that “there is no guarantee this will be successful.”

The CoinDesk DeFi Index is a new product from TradeBlock, one of the first firms to develop an index for professional investors to track bitcoin when it launched the XBX Index in 2014. CoinDesk announced its purchase of TradeBlock for an undisclosed sum in January.

The new index joins a growing list of offerings designed to help investors track prices for DeFi tokens and invest in them. Last month, the technology firm Amun launched two new crypto token products, the DeFi Index Token and DeFi Momentum Index.

The cryptocurrency data firm Messari has a dedicated screening tool tracking 164 DeFi tokens. The average price of the tokens is up 395% this year, versus 8.3% for bitcoin, the largest cryptocurrency by market value, and 160% for No. 2 ether.

According to the press release, the CoinDesk DeFi index aims to provide a “broad-based, benchmark representation of DeFi protocols,” with assets weighted by their market capitalization.

As of July 1, 2021, the CoinDesk DeFi Index consisted of the following assets, with their market-capitalization-based weightings:

• Uniswap (UNI), 49.95%
• Aave (AAVE), 10.25%
• Compound (COMP), 8.38%
• Curve (CRV), 7.44%
• MakerDAO (MKR), 6.49%
• SushiSwap (SUSHI), 4.83%
• Synthetix (SNX), 4.43%
• Yearn Finance (YFI), 3.31%
• UMA Protocol (UMA), 2.93%
• Bancor Network Token (BNT), 2.00%

UPDATE (13:19 UTC): This story has been updated to include a comment from Grayscale CEO Michael Sonnenshein.