The creator of the Bitcoin Investment Trust is today launching its fourth fund aimed at giving accredited investors a way to explore cryptocurrencies.
Unlike Grayscale's previous funds, which focus on bitcoin, ethereum classic and zcash, the offering, formally called the Digital Large Cap Fund, is designed to give investors exposure to the five largest cryptocurrencies based on market capitalization.
At launch, the fund's shares will be solely invested in a basket of crypto assets that will initially include bitcoin (BTC), ether (ETH), ripple (XRP), bitcoin cash (BCH) and litecoin (LTC).
The decision to include new currencies, and to sidestep other cryptocurrencies that are already offered by Grayscale, was based on the total value of the assets, according to Grayscale managing director, Michael Sonnenshein.
"Investors are looking for broad market exposure to the digital currency asset class," said Sonnenshein, in interview today.
He told CoinDesk:
"This gives them the ability to make a singular investment that is going to give them exposure to approximately 70 percent of the market via this one vehicle."
Investors will buy shares in the private placement investment vehicle, which is backed by actual cryptocurrency, valued at 4:00 p.m. EST. The valuation will be based on the Digital Asset Reference Rate provided by institutional trading technology firm, TradeBlock.
Each digital asset will be evaluated, less the fund's expenses and other liabilities.
To account for changes in cryptocurrency market caps, it will be rebalanced on a quarterly basis, potentially removing existing digital assets and adding new assets. The fund is a passive investment vehicle that is not actively managed.
In addition to market cap, liquidity, operational requirements and the availability of custodial solutions will also be factors weighed during listing.
Additionally, the fund will not offer a redemption program at launch, meaning there is no assurance that the value of the shares will approximate the actual value of the assets held by the fund. The fund is offering shares on an ongoing basis to certain accredited investors as described by the US Securities and Exchange Commission (SEC).
Interestingly, the total assets under management by Grayscale, a subsidiary of Digital Currency Group, has decreased by almost $1 billion in the past couple months. In December, Silbert, the founder of DCG, tweeted the firm was managing $3 billion. In the current statement, that number has decreased to $2.1 billion.
As some of Grayscale's previous fund can attest, the shares may trade at a substantial premium over the value of of the underlying asset if quoted on any secondary market in the future.
According to the official press release, Grayscale may eventually seek regulatory approval to operate a such a redemption program.
Sonnenshein further said that the firm intends to follow the path set forth by their first investment vehicle, the Bitcoin Investment trust, which trades over the counter with the ticker symbol, GBTC:OTCQX.
"It will be our intention to create a public quotation about this in about a year's time."
Disclosure: CoinDesk is a subsidiary of Digital Currency Group.
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