The launch of the Grayscale Dynamic Income Fund was meant to introduce a new era of institutional funds focused on staking rewards in the cryptocurrency industry. However, Cardano was noticeably absent from the fund, with only Ethereum and Solana being included among the top 10 coins. Smaller coins like Celestia and Osmosis, which offer high yield returns, were chosen instead of ADA.
Grayscale, a prominent crypto investment giant, recently announced the introduction of its actively managed fund that invests in proof-of-stake coins to earn staking rewards. The fund consists of nine cryptocurrencies, with earnings distributed quarterly in USD. However, the omission of Cardano, the third-largest proof-of-stake crypto project, did not go unnoticed. Cardano has a market cap of over $26 billion, making it more valuable than Toncoin, the fourth-ranked proof-of-stake coin.
A group of Cardano enthusiasts known as Cardanians collectively examined the implications of ADA’s exclusion from the fund. This group, which has been active since 2019 and operates an ADA staking pool, explored the advantages and disadvantages of being part of the fund and speculated on what lies ahead for Cardano.
Grayscale seems to have chosen proof-of-stake coins with the highest returns for its fund. The inclusion of Ethereum and Solana, which have a combined worth of over $540 billion and are among the most traded coins in the market, was an obvious choice. However, compared to Cardano, the other coins in the fund pale in comparison in terms of size, utility, and market share. For example, Osmosis, the coin with 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 half that of Cardano. Despite this, both projects, DOT and OSMO, offer high yields of 16.52% and 10.76% respectively, whereas ADA’s yield is only 3.05%.
The exclusion of Cardano by Grayscale can be seen as both a blessing and a curse, according to Cardanians. On the one hand, inclusion in the fund could lead to price increases as the fund accumulates coins, similar to the effect Bitcoin spot ETFs have had on the top cryptocurrency. Additionally, the fund’s accumulation of coins increases security and makes a 51% attack more costly. On the other hand, the fund’s actions could also lead to a collapse if it loses interest in a project and decides to sell off all its coins. Moreover, by accumulating tokens, Grayscale goes against the decentralized nature of cryptocurrencies.
The Cardanians note that Grayscale’s strategy bears similarities to airdrops, albeit in a more sophisticated manner. They believe that this system will eventually reach an economic impasse. If inflation is excessively high, the price of coins will plummet to a point where the high staking rewards are no longer appealing. Conversely, if inflation diminishes over time, as seen with Solana, staking funds will eventually lose interest and move on to another project.
In conclusion, the exclusion of Cardano from the Grayscale Dynamic Income Fund has sparked discussion among Cardano enthusiasts. While there are potential benefits to being part of the fund, there are also drawbacks that need to be considered. Ultimately, the crypto industry is constantly evolving, and it remains to be seen what the future holds for Cardano in terms of institutional funds and staking rewards.