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With cryptocurrency still being a young asset class, two things are becoming abundantly clear to advisors. First, youth is luring investors into crypto. At the very least, clients are becoming more inquisitive about digital assets, assuming they've yet to directly to get involved.
Second, many clients still have limited crypto knowledge bases. Ask your average client how many cryptocurrencies he or she can name. Many will say bitcoin. A few more more might be able to add ether to the list. After that, things get dicey.
Fact is, there are 6,246 digital coins on the market today, according to CoinMarketCap.com. Yes, that's too many and, no, not all are worth being well-versed in let alone devoting capital to. That is to say while there are always hidden gems to be unearthed among smaller stocks, finding those gems in crypto is harder and riskier.
For many crypto-crazed clients, sticking with the big boys of crypto is the safe way to go in an asset class with a narrow margin for error. The Grayscale Digital Large Cap Fund has clients covered.
Ins and Outs of Grayscale Digital Large Cap Fund
The Grayscale Digital Large Cap Fund is three and a half years old – practically ancient in crypto index fund terms. If there is a rub with this product, it's that it's only available to clients that can pony up the required minimum investment of $50,000.
That's the bad news. The good news is that the fund is eligible for tax-advantaged accounts, including certain IRAs and Roth IRAs. Additionally, the $521.33 million fund is delivering the goods in terms of performance as it's higher by a staggering 367% over the past 12 months. Moreover, the fund offers the straight forward recipe that will resonate with a wide array of clients that can afford the cost of admission.
“Grayscale Digital Large Cap Fund (the “Fund”) is an investment vehicle that enables investors to gain access and exposure to the upper 70% of the digital currency market in the form of a security without the challenges of buying, storing, and safekeeping digital currencies directly,” according to the issuer.
Translation: The fund allocates nearly 94% of its weight to bitcoin and ethereum. That makes sense because, by market capitalization, bitcoin and ether simply dominate the crypto universe. Consider the following. Ether, the token born out of the ethereum blockchain, is number two behind bitcoin and has a market value of $377.28 billion as of late Aug. 30. That's more than quadruple the market cap of third place cardano.
As such, the Grayscale product features exposure to six digital assets, but those in the third through sixth spots on the roster combine for barely more than 6% of the fund's weight.
“For inclusions, each new asset to be included in the Fund’s portfolio must have a market capitaliza-
tion at least 1.25 times that of the smallest Fund Component at the time of measurement, on a trailing 90-day average market capitalization, and on a trailing 90-day median market capitalization,” adds Grayscale.
Safe, Relatively Speaking
Acknowledging that bitcoin is just 12 years old, safety in the crypto space remains somewhat elusive, but the Grayscale Digital Large Cap Fund can help tilt the odds in clients' favor.
Investing speak is littered with far too many casino analogies and metaphors, but in this case it's appropriate. We all know that upon walking into a casino, the odds are against us. It's the same with smaller cryptos and its incumbent upon advisors to articulate that to clients.
By limiting its focusing to the largest players, the Grayscale Digital Large Cap Fund puts clients on a level playing field with potentially enhanced odds of superior outcomes while still providing robust exposure to important, emerging crypto themes.
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