CoinShares Releases DeFi Index Token for Institutional Investors

Financial indexes bring legitimacy to emerging asset classes, CoinShares Chairman Danny Masters told CoinDesk.

AccessTimeIconFeb 22, 2021 at 2:00 p.m. UTC
Updated May 9, 2023 at 3:16 a.m. UTC

Asset manager CoinShares is coming to market with a decentralized finance (DeFi) token – one meant for institutional investors.

The London-based firm best known for its bitcoin exchange-traded product XBT has released its CoinShares Gold and Cryptoassets Index Lite (CGI) token on the Ethereum blockchain. The CGI token was built in cooperation with Index Coop, the team behind the DeFi Pulse Index, and the Imperial College of London, according to documents shared with CoinDesk.

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  • The CGI token consists of two equally weighted "wrapped" crypto assets – wrapped bitcoin (WBTC) and wrapped ether (WETH) – and the firm’s wrapped gold token, wDGLD. The index itself, the CGCI, was first released in May 2020.

    Indexes bring legitimacy and ease of access to novel asset classes, CoinShares chairman Danny Masters told CoinDesk in an interview. For example, the Goldman Sachs Commodity Index of the mid-2000s introduced institutional investors to the commodities market previously not considered an asset class at all, Masters said.

    “When [institutional investors] came to the commodity space, they wanted an index,” Masters said. History is likely to repeat with digital assets, he said.

    The index token itself is structured so as to take advantage of the infamous volatility of crypto markets. 

    The CGI itself uses the Shannon's Demon portfolio methodology which breaks asset holdings into two classes: volatile and non-volatile assets – in this case, crypto and gold. 

    Shannon's Demon
    Shannon's Demon

    The portfolio rebalances to the original weights on a set schedule regardless of ups or downs. The methodology has proven to beat passive investment products offered by traditional indexes.

    The CGI token follows the release of the DeFi Pulse Index (DPI) in September and Bitwise’s DeFi Index Fund on Feb. 17. That index, unlike CoinShares', tracks a basket of differently weighted DeFi tokens such as AAVE or UNI.

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