A Gray Area 🤍🧠

July 20, 2021: New Grayscale DeFi Fund: Fun But Underdone

Funds are the hotness. While you’re getting mauled to ribbons by bears, you can at least enjoy the satisfaction of knowing you’re diversified.

Grayscale’s DeFi fund is the biggest splash of late.

This marks Greyscale’s second diversified fund for the multibillion dollar crypto behemoth, following their Large Cap Fund launched in early 2018.

They based their initial weighting on the Coindesk DeFi fund, but for the sake of their clients one hopes they eventually move to a more sophisticated weighting.

If nothing else, the optics of a fund with such a weighting is not a good look for DeFi. In addition to the imbalance, it also leaves investors overly exposed to trash tokens.

It would be like a fund tracking tech, but the weighting was 50% OnlyFans or 4Chan, with FAANG under 10% apiece. Sure, a porn site may get a lot of traffic, but you perhaps downplay the smut angle a touch if you want to appear bona fide.

As for the effect on Curve, it presently amounts to about $1.8MM per @DefiMoon’s calcs. A nice chunk of change, yet when measured against the Lockening war it would be just a few days. Still, if this amount was locked as veCRV it would be towards the top of the public leaderboard, yet significantly behind Convex and Yearn.

So this got me wondering — is Grayscale locking that CRV to earn those juicy CRV yields?

A couple million worth of CRV could convert to nearly a stick worth of free money per year. Are they turning down the money just sitting on the table?

It’s easy enough to check.

Ouch. It feels almost criminal.

Nearly 75% of all $CRV, (a crazy high number for crypto), is locked to grab those delicious rewards. Grayscale leaving it unlocked technically positions them among the dumb money in the room. I’m no lawyer, but shouldn’t they have to disclose to their investors if they are acting with gross negligence?

We presume some technicality means they need to keep their clients’ funds liquid, in which case that four year lock could be off limits. One could still imagine a variety of solutions they could employ, ie $cvxCRV with some sort of depeg insurance.

At this point we’re pretty deep into speculation. It could be any variety of reasons at play here, so we’d want a bit more information before we go too far down the rabbit hole. For instance, perhaps it’s simply gas prices have been too high lately. Or perhaps Barry’s grown so rich he can’t be bothered to chew out his underlings over a measly mill.

Oh well, you’ve got to walk before you run. We imagine the staff carrying this weight around will grow attuned to the issue, and surely they’ll be itching to solve the problem soon enough.

At least Grayscale investors get some exposure to Curve. Imagine a DeFi fund, and a llama-themed one at that, that didn’t even bother to include CRV.

For more info, check our live market data at https://curvemarketcap.com/ or our subscribe to our daily newsletter at https://curve.substack.com/. Nothing in our newsletter can be construed as financial advice. Author is a $CRV maximalist and has positions in $cvxCRV, has no stake in Grayscale or anything else mentioned.