Asset manager CoinShares is coming to plug in with a DeFi [Decentralized Finance] token – one meant for institutional investors.
The London-based firm primarily known for its bitcoin ETP [Exchange-traded Product] XBT has released its CoinShares Gold and Cryptoassets Index Lite [CGI] token-based onto the Ethereum blockchain. The CGI token was inbuilt cooperation with Index Coop, the team behind the DeFi Pulse Index, and therefore the Imperial College of London, consistent with official documents.
The CGI token consists of two equally weighted “wrapped” cryptocurrency assets – wrapped bitcoin [WBTC] & wrapped ether [WETH] – and therefore the firm’s wrapped gold token, wDGLD. The index itself, the CGCI, was primarily released earlier in May last year.
Indexes bring legitimacy and simple access to novel asset classes, CoinShares Chairman Danny Masters explained within an interview. For instance, the Goldman Sachs Commodity Index of the mid-2000s introduced institutional investors to the commodity exchange previously not considered an asset class in the leas, Masters explained.
“When [institutional investors] came to the commodity space, they wanted an index,” Masters said. History is probably going to repeat with digital assets, he added.
The index token itself is structured so on cash of the infamous volatility of cryptocurrency markets.
The CGI itself uses Shannon’s Demon portfolio methodology that breaks asset holdings into two classes: volatile and non-volatile assets – within this case, crypto and gold.
The portfolio rebalances to the primary weights on a group schedule no matter ups or downs. The methodology has proven to beat passive investment products offered by traditional indexes.
The CGI token follows the launch of the DPI [DeFi Pulse Index] earlier in September and Bitwise’s DeFi Index fund on 17th Feb. That index, unlike CoinShares’, tracks a basket of differently weighted DeFi tokens like AAVE or UNI.