Mike Novogratz' Galaxy Digital is betting that 2021 will be the year in which Ethereum becomes an investment darling among institutions.
That's the thesis of a soon-to-launch suite of Ethereum-focused funds. The products will officially roll-out in mid-February, according to a document sent to Galaxy clients.
Like other investment vehicles in the crypto market, the Galaxy Ethereum Fund aims to provide exposure to ether (ETH) -- the native cryptocurrency of the Ethereum network -- through a vehicle structured as a security.
The fund's pricing will be drawn from the Bloomberg Galaxy Ethereum Index and its assets will be held in custody by Gemini. Galaxy will charge a management fee of 1% for investments larger than $100,000 and 1.25% for investments under that amount. The minimum investment required is $25,000.
In addition to the Galaxy Ethereum Fund, the firm will offer two institutions-focused funds aimed at onshore and offshore investors. For both these funds, management fees are 0.75% for Class A shares and 1% for Class B shares.
The launch timing is notable, given that CME Group is expected to go live with its ETH futures product on February 7. Galaxy's funds and CME's upcoming futures product highlight the growing intersection between Ethereum and the interests of institutional investors.
In Galaxy's view, ETH offers a high-growth investment opportunity.
"We consider ETH to be a growth asset; investing in ETH is similar to investing in a basket of early-stage, high-growth technology stocks that provides investors exposure to the explosion of next-gen smart contracts and decentralized applications," the firm said. Galaxy additionally points to the decentralized finance (DeFi) market in its product pitch, noting: "Six applications in the Decentralized Finance space are now worth more than $1 billion and are generating up to $100s of millions in annualized revenues."
In a recent episode of The Scoop, Polychain's Olaf Carlson-Wee predicted that major investors would turn their attention to the DeFi realm.
"Once you have $100 million of bitcoin, you might start to think, how I could get yield on this bitcoin, for example," he said. "A lot of the time the answer there is through on-chain financial contracts."
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