- Grayscale Investments’s new Dogecoin Trust adds to its private placemnets portfolio totaling 13 crypto products.
- Dogecoin has evolved from a meme to a significant financial tool, with a market cap of $50 billion.
- Analysts speculate Grayscale may convert the Dogecoin Trust into an ETF.
Grayscale Investments announced on 31st January that they have rolled out a new investment fund focused on Dogecoin. It aims to capitalize on the growing interest in alternatives to Bitcoin.
With over 25 products in its portfolio, the firm had previously 12 crypto products under “private placements.” Now, that number has increased to 13 with the addition of the “Grayscale Dogecoin Trust.”
According to their website, shares purchased in this private placement will initially be restricted for one year. This new product is designed to expose accredited investors to the DOGE memecoin.
The Dogecoin Trust will track Dogecoin’s market price, minus fees and expenses, with Grayscale charging a management fee of 2.50%. It has come a long road, made initially as a joke during a prior crypto bubble.
However, it has steadily gained traction, thanks to the backing of Tesla CEO Elon Musk. As a result, once forked from Litecoin, today, with its large popularity, it stands as the world’s eighth-largest cryptocurrency.
What Does Grayscale Dogecoin Trust Marks A Great Feat?
Since its inception as a memecoin, Dogecoin has become a significant player with its expanding user base. Users are drawn to Dogecoin for its low transaction fees and quick processing times. That makes it a convenient option for payments across various platforms.
The launch of Grayscale Investments’ new Dogecoin Trust signifies that DOGE has evolved from a meme into a legitimate financial instrument. This move showed its potential to enhance ease of use within financial systems, granting under-served banks to experience mainstream finance.
However, it’s noteworthy that, unlike an ETF traded on stock exchanges, a trust is a private investment vehicle with limited liquidity. As a result, shares of the Dogecoin Trust may trade at a premium or discount relative to the actual DOGE price.
Despite these constraints, many investors view this development as a positive sign for the memecoin. Increased institutional exposure could bolster DOGE’s credibility and encourage even greater adoption in the future.
Why are only accredited investors, not retail investors, eligible to invest in Grayscale’s “DOGE-Trust”?
According to Grayscale Investments, the Dogecoin Trust carries specific risks. It represents a speculative investment that is not easily liquidated. Market participants may purchase Trust shares at premiums or discounts relative to the actual value of the Dogecoin asset.
However, the firm believes investors should be prepared for long-term ownership and potential regulatory changes.
By eligibility factor, to participate in the Dogecoin Trust, investors must qualify as accredited. This means they must have a net worth exceeding $1 million or a high annual income. Generally, retail investors do not meet these criteria for direct participation in the private placement phase.
Furthermore, retail investors can only join if Grayscale Investments successfully lists Trust shares on secondary markets. Once it plans for the Trust to convert into an ETF, clearance from regulatory bodies is needed.
Is A Dogecoin ETF On Horizon?
Many market analysts, including ETF expert Nate Geraci, believe that Grayscale Investments will eventually convert its Dogecoin Trust into an ETF. Geraci’s post points out the Grayscale history of ETFs.
It has a history of transforming its crypto trusts into spot ETFs, having successfully done so with its Bitcoin and Ethereum trusts. This speculation comes from Grayscale Investment’s recent filing for an XRP ETF. The firm is also working on converting its Solana and Litecoin trusts into ETFs.
Meanwhile, other companies like Bitwise and REX Shares have already submitted applications for Dogecoin ETFs with the SEC. If these applications receive approval, Grayscale Investments may feel compelled to convert its DOGE Trust into an ETF.
Suppose a DOGE ETF comes to fruition, it would offer investors a more straightforward and regulated way to gain exposure to DOGE. At the same time, it would mitigate the risks associated with directly holding the cryptocurrency.
Disclaimer
In this article, the views, and opinions stated by the author, or any people named are for informational purposes only, and they don’t establish the investment, financial, or any other advice. Trading or investing in cryptocurrency assets comes with a risk of financial loss.
Varuni has been in the web3 space for half a decade, witnessing the changing dynamics of DLT, Blockchain and Web3. With 8 years of journalistic expertise, she has a keen interest in emerging technology and their impact on society. She has published news and on-chain analysis articles on Nasdaq as well as some of the top web3, crypto news firms. Currently, she heads The Coin Republic as the Editor-In-Chief.