- The Grayscale Dynamic Income Fund launched to usher in a new era of institutional funds focused on staking rewards, but the crypto giant left Cardano out of its flagship fund.
- The fund included only Ethereum and Solana from the top 10 coins, with smaller coins with high yield returns like Celestia and Osmosis getting in ahead of ADA.
A week ago, crypto investment giant Grayscale announced the launch of its newest product—an actively managed fund that invests in proof-of-stake coins to earn staking rewards. As Crypto News Flash reported back then, the fund invested in nine cryptos, with the earnings distributed quarterly in USD. One giant PoS cryptocurrency project was missing—Cardano.
Cardano is the third-largest PoS crypto project after the market leader Ethereum and second-placed Solana, both of whom were included in the Grayscale Dynamic Income Fund. With a market cap exceeding $26 billion, it’s more than twice as valuable as the fourth-placed PoS coin, Toncoin. As such, its absence from Grayscale’s fund didn’t go unnoticed.
A group of Cardano enthusiasts under the Cardanians collective took to X to dissect what ADA missing out on the fund means. The group, which has been active since 2019 and operates an ADA staking pool, dived into the pros and cons of being involved in the fund and what’s next for ADA.
The time is coming when institutions will establish funds focused on staking rewards.
Grayscale founded the first such fund.
It has launched the Grayscale Dynamic Income Fund (GDIF).
Let's explore this fund and find out why #Cardano is not in it.
First of all, coin holders… pic.twitter.com/ljTuSdl3jL
— Cardanians (CRDN) (@Cardanians_io) March 12, 2024
As CNF reported, Grayscale seems to have picked the PoS coins with the best returns. Ethereum and Solana’s inclusion was a no-brainer, regardless of their returns. Combined, they are worth over $540 billion and are among the six most traded coins in the market.
However, after that, the other coins pale in comparison to Cardano in terms of size, utility, and market share. Osmosis, which had the highest share of the fund at 16.5%, has a market cap of $1.05 billion and is not even in the top 100 coins. Polkadot, the third-highest allocation, has a market cap and trading volume that is half that of Cardano. However, the two projects—DOT and OSMO—have something in common: they have high yields at 16.52% and 10.76%. ADA’s yield is at 3.05%.
Cardano Left Out by Grayscale—Blessing in Disguise?
According to Cardanians, inclusion in Grayscale’s fund has pros and cons. The pros include possible price pumps as the fund scoops up coins, similar to what Bitcoin spot ETFs have done for the top crypto, which recently hit a new record high, as Crypto News Flash reported. Another pro is that as the fund scoops up the coins, it boosts security, making the cost of a 51% attack much higher.
However, the fund also has drawbacks. For one, while it can easily pump the price, it can also easily spark a collapse if it loses interest in a project and dumps all its coins. Additionally, by accumulating the tokens, Grayscale is going against the decentralization ethos that crypto was founded on.
The Cardanians observe that Grayscale’s strategy “bears a striking resemblance to airdrops, albeit more sophisticated.” They added:
This system is bound to reach an economic impasse sooner or later. If inflation is excessively high, the price of the coins will plummet to such an extent that it will no longer be appealing despite the high staking rewards. If inflation diminishes over time, as is the case with Solana for instance, it will eventually lose its allure for staking funds. They will just pick another project.
