Major Crypto Fund Reduces Ethereum and XRP Holdings in Favor of Bitcoin and Litecoin

The recent crypto market surge has led most individual altcoins to see some hints of individual trading patterns separate from that of Bitcoin, although their trend has overwhelmingly been subject to which direction BTC moves.

The uniqueness of the recent trading activity has led one major crypto fund to shift its exposure to multiple major cryptocurrency assets, which may signal how they expect their fund’s individual holdings to trend throughout 2019.

Grayscale Shifts Crypto Holdings After Recent Market Surge

Grayscale Investments, an investment group who focuses on digital assets, announced in a recent set of tweets that they have adjusted their Digital Large Cap Fund’s (DLC) crypto holdings in late-March by notably reducing its exposure to both Ethereum and XRP, while increasing their exposure to Litecoin, Bitcoin Cash, and Bitcoin.

In a string of tweets, Grayscale explained the move, noting that the decision to shift the DLC’s holdings came about following their quarterly review, which resulted in a rebalancing of its holdings in an effort to uphold the fund’s rule-based strategy that “seeks to provide exposure to the large cap segment of the digital asset class.”

“Following the Quarterly Review (3/31/19), we are pleased to announce the updated weightings for Digital Large Cap Fund (‘DLC’),” Grayscale explained, further elaborating on the DLC fund, explaining that it is “a passive, rules-based strategy that seeks to provide exposure to the large cap segment of the digital asset class (70% target coverage).”

2/ DLC is a passive, rules-based strategy that seeks to provide exposure to the large cap segment of the digital asset class (70% target coverage) — Grayscale (@GrayscaleInvest) April 5, 2019

Moreover, Grayscale also provided the statistics for exactly how drastic the rebalancing would be, noting that they are increasing the fund’s exposure to Bitcoin from 66.8% to 68.3%, its exposure to Bitcoin Cash from 2.8% to 2.9%, and its exposure to Litecoin from 1.8% to 3.3%.

In order to increase the DLC’s holdings of the three aforementioned cryptos, Grayscale significantly cut its XRP exposure – reducing it from 14.7% to 11.9%. They also slightly reduced its exposure to Ethereum from 13.9% to 13.6%.

Importantly, they also explained that no new crypto assets qualified for eligibility to be added to the fund following the quarterly review.

“Although no new assets qualified for inclusion following DLC’S Quarterly Review (3/31/19), the below table highlights how DLC’s weightings have changed from December 31, 2018 to March 31, 2019: $BTC $ETH $XRP $BCH $LTC,” Grayscale noted in a tweet.

3/ Although no new assets qualified for inclusion following DLC’S Quarterly Review (3/31/19), the below table highlights how DLC’s weightings have changed from December 31, 2018 to March 31, 2019: $BTC $ETH $XRP $BCH $LTC pic.twitter.com/HwlKPKTQDV — Grayscale (@GrayscaleInvest) April 5, 2019

Fund Rebalancing Likely Sparked by Recent Crypto Market Price Action 

The decision to make some fairly significant adjustments to the fund’s exposure to the major cryptocurrencies was likely dictated by the recent price action in the crypto markets, which led virtually all major digital assets to surge significantly.

Over the past month, Bitcoin has surged from lows of roughly $3,800 to highs of $5,300. This massive surge led the other assets held in the DLC fund to climb, with Bitcoin Cash skyrocketing from monthly lows of $128 to highs of $340, and Litecoin jumping from lows of $50 to highs of just under $100.

XRP and Ethereum – which were the two cryptos that DLC reduced its exposure to – both have lagged behind the other major cryptos slightly, with Ethereum climbing from monthly lows of $130 to highs of just over $180, and XRP climbing from lows of approximately $0.30 to highs of $0.37.

Grayscale likely expects both Ethereum and XRP to continue to lag behind the other major alts, which would justify their decision to reduce their exposure to these assets, while adding weight to the other three.