Insights

Asset Management is Going Digital, DeFi is Powering the Change

CoinShares launches one of the first ever investable indices on the Ethereum network with TokenSets and the Index Coop.

By   Michael Petch 22nd February 2021

In April 2020, the CoinShares Group launched the CoinShares Gold and Cryptoassets Index (CGCI), the first ever EU Benchmark Regulations approved index that tracks gold and cryptoassets in a risk-controlled manner. Today, the Group announces the launch of the index on the Ethereum network.


Introducing the CGI, a Purely Digital On-Chain Index

The CoinShares Gold and Cryptoassets Index Lite (CGI) is an adaptation of the CGCI which only tracks ERC-20 tokens, thereby making it functional on the Ethereum network. The CGI is a low-volatility index that utilises the concept of volatility harvesting through (a) forming an equally weighted basket of bitcoin and ether and (b) combining it with gold using weighted-risk contribution as a rebalancing mechanism. By decreasing volatility levels, it seeks to yield superior risk-adjusted returns when compared to a number of alternative strategies, including holding cryptoassets or gold alone. Unlike most indices, this index operates entirely on the Ethereum network and as a result is directly investable on-chain. The CGI methodology is accessible here.

The CGI was built using the Set Protocol which allows for the bundling of cryptoassets into a fully collateralized basket in the form of an ERC-20 token on Ethereum. In other words, the CGI token is always fully backed by the underlying constituents and is verifiable on-chain. The CGI can be held on Ethereum native wallets and can be accessed via DEX’s. The CGI currently trades on Uniswap in a CGI/ETH pool here.


The CGI was launched on October 28th, 2020. Figures for the CGI prior to this date have been derived by applying the methodology found here. The crypto-basket price base level was set to 100 on July 1st, 2015. The Index base level was set to 1,000 on January 1st, 2016. Calculations do not include fees and expenses. Past performance is no indication of future performance


The CGI was launched on October 28th, 2020. Figures for the CGI prior to this date have been derived by applying the methodology found here. The crypto-basket price base level was set to 100 on July 1st, 2015. The Index base level was set to 1,000 on January 1st, 2016. Calculations do not include fees and expenses. Past performance is no indication of future performance


The Times They Are a-Changin'

The CGI represents a growing trend towards digitalization and decentralization. All operations of running an index - from issuance to redemption - that are normally conducted by multiple intermediaries can now be done on-chain directly by users.

Not only will users be able to hold the CGI digitally in their wallet, but a user can also participate in any step of the index process. The issuance process can be initiated by depositing assets into a smart contract on the TokenSets platform and the user receives units of the index directly to their address. Similarly, a user could lock up their index tokens and provide liquidity for the token or could use the index token as collateral.

Everything entirely on-chain.


Figure 2. CGI on the TokenSets Platform


Behind the Innovation

The CGI was launched in partnership with the Index Coop, a decentralized and autonomous asset manager that launches and maintains cryptoasset index products. The CGI was built using Set Protocol’s battle-tested V2 infrastructure, built by the TokenSets team.

Danny Masters, Chairman of CoinShares commented on the launch “The CGI presents two important opportunities for those coming from traditional finance; an exposure to a new asset class, crypto, offered in a risk mitigated fashion and, in this on-chain index form, an entirely new way of doing business. Indexation has always been a core component to finance and with new on-chain offerings we will see considerable simplification, higher transparency and much lower friction when compared to historical analogue indices”.


On-chain Cryptoasset Indices

The on-chain index market has ushered in more than $180 million in AuM under 6 months. The largest on-chain index in terms of assets under management (AuM) is currently the DeFi Pulse Index (DPI), a capitalization-weighted index that tracks the DeFi sector, which has $120m in AuM and 10,500+ holders. The DPI, which was also launched by the Index Coop, represents a growing demand for index products in the cryptoasset industry and that live natively on-chain.

As the industry matures, investors will think more about exposure to the overall market and for ways to strengthen their portfolio. With this, index products, such as the CGI, become more important.


Next Steps for the CGI

Starting with the first regulated bitcoin fund in 2014, CoinShares had led the industry with first-of-its-kind products. We recognize the innovative opportunities provided by DeFi and how it can complement asset management services and are excited to offer the first gold and cryptoasset index on the Ethereum blockchain.

The CGI is now available on TokenSets and Uniswap and will soon be integrated with other platforms and DApps.




Disclosure

The information contained in this document is for general information only. Nothing in this document should be interpreted as constituting an offer of (or any solicitation in connection with) any investment products or services by any member of the CoinShares Group where it may be illegal to do so. Access to any investment products or services of the CoinShares Group is in all cases subject to the applicable laws and regulations relating thereto.

This document is directed at professional and institutional investors. Investments may go up or down in value and you may lose some or all of the amount invested. Past performance is not necessarily a guide to future performance. The CGI was launched on October 28th, 2020. Figures for the CGI prior to this date have been derived by applying the methodology found here: https://coinshares.com/assets/resources/cgi-methodology.pdf. The crypto-basket price base level was set to 100 on July 1st, 2015. The Index base level was set to 1,000 on January 1st, 2016. Calculations do not include fees and expenses.

Although produced with reasonable care and skill, no representation should be taken as having been given that this document is an exhaustive analysis of all of the considerations which its subject-matter may give rise to. This document fairly represents the opinions and sentiments of CoinShares, as at the date of its issuance but it should be noted that such opinions and sentiments may be revised from time to time, for example in light of experience and further developments, and this document may not necessarily be updated to reflect the same.

The information presented in this document has been developed internally and / or obtained from sources believed to be reliable; however, CoinShares does not guarantee the accuracy, adequacy or completeness of such information. Predictions, opinions and other information contained in this document are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Third party data providers make no warranties or representation of any kind in relation to the use of any of their data in this document. CoinShares does not accept any liability whatsoever for any direct, indirect or consequential loss arising from any use of this document or its contents.

Any forward-looking statements speak only as of the date they are made, and CoinShares assumes no duty to, and does not undertake, to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Nothing within this document constitutes (or should be construed as being) investment, legal, tax or other advice. This document should not be used as the basis for any investment decision(s) which a reader thereof may be considering. Any potential investor in digital assets, even if experienced and affluent, is strongly recommended to seek independent financial advice upon the merits of the same in the context of their own unique circumstances.

The CoinShares Astronaut is a trademark and service mark of CoinShares (Holdings) Limited.

Copyright © 2021 CoinShares. All rights reserved.

Newsletter

Sign up for our monthly newsletter

Subscribe

Our latest insights & research. Never spam.