Morgan Creek Digital Launches Digital Asset Index Fund for Institutions

Riding the Crypto Wave with a New Index Fund

Morgan Creek Digital, backed by the institutional heavyweight Morgan Creek Capital, has announced the launch of an ambitious Digital Asset Index Fund that hopes to attract deep-pocketed investors looking to dip their toes into the digital currency pool. With a staggering $1.5 billion in assets under management, this fund aims to provide an indirect gateway to the world of Bitcoin (BTC), Ethereum (ETH), and several other heavy hitters in the crypto arena.

Excluding Pre-Mined Assets: A Risk Management Play

What’s intriguing (and slightly controversial) about this fund is its decision to exclude certain cryptocurrencies like Ripple (XRP) and Stellar (XLM). The reasoning? Well, as Morgan Creek’s own Anthony Pompliano put it, it’s all about risk management. Tokens that were pre-mined and allocated significantly to the founders, creating a central party ownership dilemma, are seen as potential landmines for investors. Pompliano remarked,

“If there’s a central party that owns 30% or more of supply then we withhold those from the index.”

Why Centralization Raises Red Flags

The underlying concern is that centralization can expose investors to manipulation risks, especially if large holders can sway market conditions. As Forbes highlighted, if regulators decide to classify tokens with centralized control as securities, it could make them even less appealing. It’s all about keeping the investment playing field fair and decentralized.

A Diverse Basket of Digital Assets

While it’s a bummer for fans of Ripple and Stellar, the fund isn’t leaving investors high and dry. Alongside Bitcoin and Ethereum, the index will also include:

Bitcoin Cash (BCH)
EOS
Litecoin (LTC)
Zcash (ZEC)
Monero (XMR)
DASH
Ethereum Classic (ETC)
Omisego

These assets will be held in a market-cap-weighted basket, which means that their inclusion and weight will change regularly based on market performance. Talk about a dynamic investment strategy!

Safety First: Custody Qualifications and Trade Limits

In an effort to keep things safe and sound, Morgan Creek is placing a variety of restrictions on the types of assets that can be included in the fund. This includes imposing custody qualifications, trading concentration limits, and ensuring cold storage requirements. Sadly, that means algumas other contenders will be left out in the cold, such as IOTA and Cardano (ADA). Vechain (VET) is also off the table, as it gets traded primarily on just one exchange. They’re playing hard to get!

Regulatory Landscape: The Never-Ending Saga

As if the world of cryptocurrency wasn’t complex enough, the regulatory landscape hangs like a gavel ready to drop. Earlier this year, SEC authority Gary Gensler suggested that altcoins, including Ethereum and Ripple, might end up being deemed unregistered securities. However, there’s been good news for Ethereum, which has been deemed sufficiently decentralized to avoid that classification for now, while Ripple continues to navigate its ongoing legal battles.

In summary, the launching of this new index fund by Morgan Creek Digital may not be a simple stroll through the park, but it certainly presents institutional investors a more curated and potentially less risky option for entering the realm of cryptocurrencies.