Digital Asset Index Funds and Multiple-Asset Funds (OTC)
Publicly Traded Digital Asset Index Funds and Multiple-Asset Funds offer investors exposure to the price movements of a basket of digital assets while avoiding the hassles of buying, storing and safekeeping these assets.
Depending on the fund, the underlying assets could be coins, tokens or other digital assets. These funds are typically structured as Delaware statutory trusts.
Some funds are actively managed; others are based on an index composition. Managers of active funds evaluate the market and its prospects, consider market capitalization, asset prices, number of coins/tokens in circulation, daily trading volumes, cyclical patterns and other attributes in order to make investment buy/sell decisions. Index funds often rebalance and reconstitute their portfolios on a calendar or percentage basis or other trigger.
Before becoming publicly tradable, shares are created through a private placement offered only to Accredited Investors via an Offering or Private Placement Memorandum. In these cases, investors purchase newly-created shares at the Net Asset Value of the digital assets held by the trust at the time of purchase.
Trusts approved for trading in the secondary market provide liquidity to those who have held their shares for a required 6 or 12 months period. Following that lock-up period, trust shares can be transferred to a brokerage account for trading on the OTC market, where retail and institutional investors can purchase them. Shares of these trusts are eligible for IRAs and Roth IRAs.
Because these trusts lack the creation and redemption mechanism that keeps ETF share prices close to the underlying NAV, shares trading OTC might trade at a premium or discount.
Unlike other investments that require large investment minimums, multiple-asset trusts trading OTC can often be acquired with little to no account minimum.
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Bitwise 10 Crypto Index Fund (BITW) offers diversified exposure to the top 10 large-cap digital assets weighted by market capitalization. Assets are purchased across several liquidity providers to find the best execution and stored in 100% cold storage. A private placement is available at NAV for accredited investors. Shares also trade OTC at market prices.
Grayscale Digital Large Cap Fund (GDLC) holds large-cap digital assets that collectively comprise 70% of the digital asset market. Assets are custodied in offline cold storage with Coinbase Custody Trust Company. A private placement is available at NAV for accredited investors. Shares also trade OTC at market prices.
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