Grayscale’s New Fund Focuses on Ethereum Competitors

Solana, Avalanche, Polkadot, and Cardano all feature in the new fund. 

Grayscale Highlights Smart Contract Platforms 

Grayscale’s new fund shines a light on some of Ethereum’s most promising competitors. 

The asset management giant announced the launch of the Grayscale Smart Contract Platform Ex-Ethereum Fund (also known as “GSCPxE”) Tuesday, touting the new offering as a fund giving exposure to “a selection of industry-leading smart contract platforms.” 

The new fund features Cardano (24.63%), Solana (24.27%), Avalanche (16.96%), Polkadot (16.16%), Polygon (9.65%), Algorand (4.27%), and Stellar (4.06%). Grayscale CEO Michael Sonnenshein explained in a press release that the firm launched the fund to give investors a way to diversify across multiple smart contract blockchain in what’s become an increasingly competitive market. He said: 

“Smart contract technology is critical to the growth of the digital economy, but it’s still too early to know which platform will win—from attracting and retaining the most vibrant developer communities, to ensuring the platform is high-speed, flexible, and scalable.”

Ethereum had a big 2021 as the wider crypto market boomed, helped by its dominance over the fast-growing NFT ecosystem and the launch of its crucial EIP-1559 fee burning update. The smart contract titan’s 2022 looks set to be even bigger due to a long-awaited plan to merge the blockchain from Proof-of-Work to Proof-of-Stake. 

However, rising gas fees on Ethereum and significant developments on other networks paved the way for other Layer 1 smart contract blockchains to grab some of Ethereum’s market share. Three of the biggest winners of 2021 were Solana, Terra, and Avalanche (otherwise known as “SOLUNAVAX”), which all outperformed Ethereum in the second half of the year. 

GSCPxE will track the CoinDesk Smart Contract Platform Select Ex ETH Index. Jodie Gunzberg, CFA, Managing Director, CoinDesk Indices, said that investors have an appetite for alternative smart contract networks following Ethereum’s breakout in 2021. ““Many investors allocated to ETH given its explosive growth over the past year, so now there is demand to get exposure across the rest of the Smart Contract Platform sector,” he explained. 

The fund is Grayscale’s 18th investment product and third diversified fund offering. Its flagship product is GBTC, a fund designed to give institutional investors exposure to the top crypto asset. Last year, Grayscale filed an application with the SEC to convert GBTC to an exchange-traded fund. It’s since launched a campaign to encourage would-be investors to convince Grayscale to approve the application. The SEC has rejected all previous applications for a spot Bitcoin fund, but the decision on Grayscale’s request is still pending. 

Disclosure: At the time of writing, the author of this piece owned ETH, MATIC, and several other cryptocurrencies.