'We consider ETH to be a growth asset': Galaxy Digital is launching a suite of Ethereum funds

Quick Take

  • Galaxy Digital is launching ETH-focused funds next month, according to documents shared with investors.
  • Galaxy is pitching ETH as a growth asset akin to “high-growth technology stocks”

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.

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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."

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Frank Chaparro is Host of The Scoop podcast and Director of Special Projects. He also writes a biweekly newsletter. Chaparro started his career at Business Insider, where he specialized in the intersection of digital assets and Wall Street, market structure, and financial technology. Soon after joining Business Insider out of Fordham University, Chaparro was interviewing top finance and tech executives, including billionaire Mark Cuban, “Flash Boys” star Brad Katsuyama, Cboe Global Markets CEO Ed Tilly, and New York Stock Exchange President Tom Farley. In 2018, he become a sought after reporter in the crypto world, interviewing luminaries such as Tyler Winklevoss, the cofounder of Gemini, Jeremy Allaire, the CEO of Circle, and Fundstrat head Tom Lee. For inquiries or tips, email [email protected].