Mike Novogratz's Galaxy Digital Rolling Out DeFi Index Fund2 min read
Mike Novogratz has long been a BTC bull. His company’s latest product pushes him further into the ETH space.
Galaxy Digital, the crypto-centric investment management firm founded by Novogratz in 2017, announced today it has created the Galaxy DeFi Index Fund, giving traditional investors access to the most untraditional of digital currencies.
The Bloomberg Galaxy Defi Index on which the new fund is based exposes investors to nine ETH-based DeFi governance tokens: Uniswap, Aave, Maker, Compound, Yearn.Finance, Synthetix, SushiSwap, 0x, and UMA. The biggest weight, 40%, currently goes to Uniswap’s UNI token, the largest DeFi token with a market cap of $15.5 billion, as of Wednesday.
The assets and their weightings will adjust each month “based on institutional trading and custody readiness in the United States, as well as quality of pricing,” according to a press release.
DeFi, short for decentralized finance, refers to blockchain-based protocols that cut the intermediaries out of transactions. Instead, they use computer code known as smart contracts to automate asset swaps, loans, and the like. Increasingly, those protocols themselves are managed by token holders, who use them for voting.
Galaxy Digital already offers multiple cryptocurrency funds, including for BTC and ETH; the Crypto Index Fund also mixes in BTC Cash, Litecoin, and EOS. It boasts over $1.6 billion in assets under management. But the firm reported a $175 million Q2 loss this week, citing a “34% decline in overall digital asset prices and a 41% decline in the price of BTC over the quarter.” The DeFi fund represents an opportunity to diversify its product offerings.
DeFi protocols—and the governance tokens that have enabled their rise—are a fast-growing sector of the crypto economy. There’s nearly $50 billion in assets flowing through the protocols listed on the index, a more than tenfold increase over last year. Simultaneously, the prices of their governance tokens have risen as the protocols have become more used.
The DeFi fund, open only to accredited investors (U.S. residents who earn over $200,000 a year), charges a 2% management fee and mandates that buyers keep their money in for 12 months (or pay a redemption penalty). That’s likely a small price to pay for those uninitiated to the process of buying and securely storing cryptocurrencies.