Grayscale’s Head of Research Zach Pandl explains how diversified crypto exposure could change the game for crypto investing.
Transcript:
Caroline Woods:
Joining me now, Zach Pandl, Head of Research at Grayscale. Zach, Thanks so much for being here.
Zach Pandl: It’s my pleasure. Great to see you.
Caroline Woods: So we’re here to talk about the ETF. It’s the grayscale CoinDesk crypto five ETF sort of a milestone for the crypto world because it’s the first multi-asset crypto ETP I guess we can call it. It consists of what. Bitcoin Ethereum. XRP Cardano and Solana. And tell us just I guess to start give us a quick 101 of what we need to know about each of the five holdings?
Zach Pandl:
Yeah great. Great question. People are getting familiar with Bitcoin, which is a sort of digital gold use case, a store of value, digital asset. But there’s lots of other applications of blockchain technology. And that’s what many of the other assets in this product are doing. So things like stablecoins, things like tokenization, decentralized finance for investors that want exposure to those ideas. Beyond digital gold. This is the type of thing that this product offers.
Caroline Woods:
It’s interesting because it seems like although Bitcoin, to your point, is the most recognized. Still, it seems like there’s some diversification going on. What does that tell you about overall crypto sentiment and where we are in the space?
Zach Pandl:
Well, crypto is growing up in all kinds of different ways. And that’s both on the investment product side of things, the ability for fund managers like ourselves to offer index based approaches to investing, which are very popular and common in all other asset classes, stocks, bonds, et cetera. And it’s also in the applications of the technology, you know, stablecoins coming to Wall Street, coming to mainstream finance with a comprehensive regulatory framework, for example. So this technology has been around for 15, 16 years. And it had a, a slow start, but now it’s really going mainstream in lots of different ways. And I think that process is going to continue over the next five, 10, 20 years. And these types of products, these types of ETFs are a way for investors to capture that trend over time.
Caroline Woods:
Talk to me about the benefit of investing in GDXJ versus just buying Bitcoin, Ethereum XRP outright?
Zach Pandl:
Yeah of course. You know, when people approach the stock market, some people want to be stock pickers and decide which one of the 500 sales is going to be the best performing. Other people just want exposure to the asset class, exposure to the beta. And so an index approach that rebalances over time, that follows a transparent index is a very successful way to access these markets. And the same is true in crypto. People don’t want to be coin pickers necessarily. There is a lot of complexity to blockchain technology. They just want to capture the opportunity, capture the trend over time. The beta of the asset class and this product. The grayscale CoinDesk crypto five ETF, is a great way to do that. We’ve been running this product since 2018 as a private investment vehicle. We’re thrilled to be able to offer it to many more investors as an ETF, but it’s important to note that GDXJ doesn’t actually have the same protections as a normal ETF.
Caroline Woods:
So talk to me a bit more about the trade off between the access, but also the risk?
Zach Pandl:
Well, the biggest risk for crypto investing is the same as everything else. It’s just market risk. You know this technology has been around a long time. And there will be adoption cycles and phases of success and phases where there are setbacks, just like in everything else, whether it’s quantum computing or biotech or anything else but the market risk, the ups and Downs of the asset, that’s the biggest concern that investors should have, and they should be aware of the volatility and always put these things in the context of a broader portfolio.
Caroline Woods: Does bringing multiple five, in this case digital assets under one wrapper actually mitigate some of the volatility or does it concentrate the risk?
Zach Pandl:
It will mitigate the volatility to a degree, in the same way that diversification helps in any type of asset allocation, but the biggest thing is that you’re diversifying across the use cases of the technology. Bitcoin really has this digital gold use case a macro asset. What brings someone like myself that focuses on macroeconomics into the crypto asset class. But as I said, there’s so many other things going on like tokenized assets, tokenization, and we want to get exposure to those things as well. And kind of spread our assets around within crypto.
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