According to Securities and Exchange Commission (SEC) filings made today, two Ethereum funds launched by Galaxy Digital have thus far received $32.1 million in investment.
Galaxy Digital is a cryptocurrency asset management firm led by Mike Novogratz, a noted Bitcoin bull; Galaxy created similar Bitcoin funds for individual and institutional investors back in 2019.
First noticed by CoinDesk, the Galaxy Institutional Ethereum Fund, LP, incorporated in Delaware, reported $22,031,077 in investments from three investors, while another version of the fund incorporated in the Cayman Islands reported $10,100,000 from two investors.
The purpose of such funds is to allow businesses to invest in Ethereum without buying any. While investors face the risk that prices could plummet, Galaxy Digital takes on the risk of handling private keys (although it’s partnered with US-based exchange to take custody of them).
For its troubles, Galaxy collects a fee in the range of 1%.
Grayscale Investments, which issues the Grayscale Bitcoin Trust and Grayscale Ethereum Trust, has had considerable success with a similar model. It owns over 3% of all Bitcoin in circulation and over 2.7% of all Ethereum.
The ostensible reason for Galaxy to launch the funds—besides to provide Grayscale and other funds with competition—was to capitalize on the rising appeal of decentralized finance (DeFi) protocols, which allow people to lend, borrow, and swap assets without a bank’s say-so. Most DeFi protocols are built atop the Ethereum blockchain, helping bolster the viability of that network—and the ETH tokens that are used to pay transaction fees.
The price of Ethereum, currently around $1540, has increased by over 63% since the start of the year.
The funds, which were revealed at the end of January, made their first sale on February 19. The US-based fund requires a minimum investment of $250,000, while the Cayman fund requires just $100,000 for entry.
A separate investment vehicle for accredited (read: well-to-do) investors, the Galaxy Ethereum Fund, has a lower barrier to entry: Interested individuals must invest at least $25,000. That fund has yet to file a Form D with the SEC, but has 15 days from the date of the first sale to do so.