Mike Novogratz has long been a supporter of Bitcoin. His company’s most recent product pushes him even deeper into the Ethereum space.
Galaxy Digital, Novogratz’s crypto-focused investment management firm founded in 2017, announced today the launch of the Galaxy DeFi Index Fund, giving traditional investors access to the most unconventional of digital currencies.
The new fund is based on the Bloomberg Galaxy Defi Index, which exposes investors to nine Ethereum-based DeFi governance tokens: Uniswap, Aave, Maker, Compound, Yearn.Finance, Synthetix, SushiSwap, 0x, and UMA. The most weight, 40%, is currently assigned to Uniswap’s UNI token, the largest DeFi token with a market capitalization of $15.5 billion as of Wednesday.
According to a press release, the assets and their weightings will be adjusted each month “based on institutional trading and custody readiness in the United States, as well as pricing quality.”
DeFi, which stands for decentralized finance, refers to blockchain-based protocols that eliminate the need for intermediaries in transactions. They instead use computer code known as smart contracts to automate asset swaps, loans, and other similar transactions. Token holders, who use them for voting, are increasingly in charge of those protocols.
Galaxy Digital already has cryptocurrency funds for Bitcoin and Ethereum, as well as the Crypto Index Fund, which includes Bitcoin Cash, Litecoin, and EOS. It manages assets worth more than $1.6 billion. However, the company reported a $175 million Q2 loss this week, citing a “34 percent decline in overall digital asset prices and a 41 percent decline in Bitcoin price over the quarter.” The DeFi fund represents a chance for the company to diversify its product offerings.
DeFi protocols, as well as the governance tokens that have fueled their rise, are a rapidly expanding sector of the crypto economy. The index’s protocols have nearly $50 billion in assets flowing through them, a more than tenfold increase over last year. Simultaneously, as the protocols have gained popularity, the prices of their governance tokens have risen.
The DeFi fund, which is only available to accredited investors (U.S. residents earning more than $200,000 per year), charges a 2% management fee and requires buyers to keep their money in the fund for a period of 12 months (or pay a redemption penalty). That is most likely a small price to pay for those who are unfamiliar with the process of purchasing and securely storing cryptocurrencies.