Grayscale’s New Smart Contract Fund Includes Solana, Cardano, And These Five Blockchains

Grayscale appears to be moving further down the risk curve with its non-Ethereum smart contract platform investment fund. What projects is the asset manager most bullish on?

Covered:

Grayscale Smart Contract Platform Ex-Ethereum Fund
Is Diversification Really A Good Thing?

Grayscale Smart Contract Platform Ex-Ethereum Fund

A deal’s a deal. Meet GSCPxE (Grayscale Smart Contract Platform Ex-Ethereum Fund), our newest investment product. https://t.co/sm7VJzOJcV #GSCPxE $SOL $ADA $DOT $AVAX $ALGO $MATIC $XLM

— Grayscale (@Grayscale) March 22, 2022

Digital asset management giant Grayscale just announced its first-ever non-Ethereum focused smart contract platform investment fund (GSCPxE). It looks like we’re finding out which layer-1 (L1) platforms Grayscale is bullish on; here’s a list of each token and its respective weighting in the fund:

It appears that Grayscale is massively bullish on Cardano (ADA) and Solana (SOL), as the two projects alone make up nearly 50% of the fund’s weighting. The other 50% is made up of Avalanche (AVAX), Polkadot (DOT), Polygon (MATIC), Algorand (ALGO), and Stellar Lumen (XLM).

Grayscale CEO Michael Sonnenshein says that he wants to meet investor demand as it grows in tandem with the exponential growth of the crypto industry.

“Investor demand for diversified exposure has grown in parallel to the ongoing evolution of the crypto ecosystem.

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. The beauty of GSCPxE is that investors do not have to choose one winner, and instead can access the development of the smart contract platform ecosystem through a singular investment vehicle.”

Is Diversification Really A Good Thing?

As highlighted by Sonnenshein, he thinks that the “beauty of GSCPxE” is that investors don’t have to pick one winner, they can just buy up a basket of competitors and benefit from the growth of them all. But is this truly a good strategy for investors?

As with all things in life, greater risks bring greater rewards. While investing in a basket fund of different protocols is certainly less risky, it also means that there is less gain to be realized from it. This may be the ideal strategy for big-time investors with a lot of capital to throw around, as a 15% gain on millions of dollars will bring in much more profits than even a 100% gain on a small investment.

Many retail investors can get caught up in the idea that diversification is a good idea because they see all the rich people doing it. However, let’s be honest with ourselves: as is also the case with many retail investors, they’re here to make a lot of money with a much smaller basket relative to the whales buying into Grayscale smart contract funds.

Diversification is for protecting wealth, concentration is for creating it

— Will Clemente (@WClementeIII) September 16, 2021

The point here: don’t just assume that because the big boys are diversifying, you should too. These institutional players have a lot on their plate and don’t have the time to dig deep into each protocol to make calculated, informed decisions — they just want exposure to the space. Retail, on the other hand, might have a bit more free time to research. It all comes down to what your goals are; if you’re in crypto to preserve your wealth, then diversifying is a great idea. But if you’re in the market to create wealth, you need to consolidate your bets. Don’t just buy into a lot of projects without the knowledge of their fundamental value propositions. Take the time to research, and place bets accordingly.