- GDIF optimizes for maximum staking rewards, disregarding long-term project potential.
- Cardano’s exclusion due to its capped supply, contrasting with chosen inflationary coins.
In a detailed exposition by Cardanians, a prominent Cardano supporter group, the inception of Grayscale Dynamic Income Fund (GDIF) was announced, sparking intrigue and discussion within the cryptocurrency community, particularly regarding its exclusion of Cardano (ADA).
The time is coming when institutions will establish funds focused on staking rewards.
Grayscale founded the first such fund.
It has launched the Grayscale Dynamic Income Fund (GDIF).
Let's explore this fund and find out why #Cardano is not in it.
First of all, coin holders… pic.twitter.com/ljTuSdl3jL
— Cardanians (CRDN) (@Cardanians_io) March 12, 2024
Analyzing GDIF Investment Strategy and Portfolio
The GDIF represents a novel investment vehicle, allowing investors to commit capital which is then utilized by Grayscale to invest in an array of Proof of Stake (PoS) coins. The firm stakes these tokens, earning rewards that are converted to USD and distributed to investors quarterly.
The fund’s portfolio, notably excluding ADA despite its significant market presence, includes Ethereum and Solana among the top 10 blockchains by market cap, along with other projects like Aptos, Celestia, Cosmos, NEAR, Osmosis, Polkadot, and SEI Network.
The selection criteria seem heavily weighted towards maximizing staking rewards, as evidenced by the high yields of included projects, some surpassing 16%, contrasted with Ethereum’s comparatively lower yield of 3.73%.
This strategic focus on yield optimization might hint at Grayscale’s intent to capitalize on high reward rates in the short term, rather than investing in projects based on long-term potential, market capitalization, adoption rates, or community support.
The fund’s structure, catering to institutional investors with a hefty minimum investment of 1.1 million USD, indicates a targeted appeal to a niche market segment, potentially sidelining the broader, more speculative aspects of blockchain investment in favor of immediate, tangible returns.
Inflationary vs. Capped Supply Coins in GDIF
The Cardanians’ analysis raises poignant questions about the implications of such investment strategies on the broader cryptocurrency ecosystem. High-yield staking projects often entail infinite coin inflation, potentially diluting the value of the coins over time.
This contrasts starkly with Cardano’s fixed supply cap of 45 billion ADA, suggesting a divergent approach to value creation and sustainability in the blockchain space.
Moreover, the strategy employed by GDIF, likened to a more sophisticated form of airdrops, may harbor inherent risks associated with high inflation rates. Projects with unsustainable inflation could see their coin value plummet, making them unattractive for staking despite high rewards.
This dynamic might lead staking funds like GDIF to continuously hop between projects, chasing high yields at the expense of long-term stability and growth potential.
The Cardanians’ critique extends to the cyclical nature of such investment funds, which may thrive in bull markets but falter during bearish periods, potentially failing to attract interest due to the diminished value of the portfolio against modest quarterly USD rewards.
This scenario posits a future where long-term holders, especially those who accumulated coins at lower values and reaped staking rewards through bear markets, might emerge more successful.
By selling only the staking rewards and retaining their coin holdings, these individuals could establish a sustainable passive income stream, underlining the value of scarcity, as exemplified by ADA’s fixed supply, in ensuring long-term value retention and growth. To explore this development in more depth, you can watch the YouTube video below.
Technical Analysis
From a technical analysis perspective, Crypto Capital Venture Founder Dan Gambardello sees the potential for ADA’s price to soar to $1.5 if it is able to break above the Raising Wedge pattern.
I see $1.50 ADA target 👀 pic.twitter.com/4eFFunm8Mf
— Dan Gambardello (@cryptorecruitr) March 11, 2024
However, failure in this attempt could bring a new decline for the cryptocurrency, with a target of $0.67. Another analysis from a previous ETHNews report was even more bullish, seeing a $10 price target for Cardano’s crypto rally.
At the time of writing, ADA price is up slightly in the last 24 hours, by 0.43% to $0.746. This represents a decline of 3.8% in the last 7 days.