Grayscale Removes Polygon (MATIC) From Smart Contract Fund Amidst Price Drop

• Grayscale Investments has updated the component weightings of its key crypto funds for Q2 2024.
• The changes include the removal of Polygon (MATIC) from the Grayscale Smart Contract Platform Ex-Ethereum Fund (GSCPxE Fund).
• MATIC has experienced a significant price drop of 34% over the past month, reflecting broader market turbulence.

Discover the latest adjustments in Grayscale’s key crypto funds, including the removal of Polygon (MATIC) and changes in fund weightings, and what it means for the market.

Grayscale Announces Updated Component Weightings Across Major Funds

Grayscale Investments, a leading crypto asset management firm, has announced updates to the component weightings of its primary funds, following its second-quarter 2024 reviews. The funds in question are the Grayscale Digital Large Cap Fund (GDLC), Grayscale DeFi Fund (DEFG), and the Grayscale Smart Contract Platform Ex-Ethereum Fund (GSCPxE Fund). Notably, Polygon (MATIC) has been removed from the GSCPxE Fund as part of this rebalancing effort.

Impact on Specific Funds and Asset Weightings

The Grayscale Digital Large Cap Fund (GDLC) experienced no additions or removals of tokens, according to the latest release. The fund’s composition remains heavily weighted towards Bitcoin (70.46%) and Ethereum (23.51%), with smaller allocations for Solana (3.86%), XRP (1.54%), and Avalanche (0.63%). This static lineup follows prior adjustments, such as the inclusion of XRP and AVAX earlier this year and the removal of Cardano (ADA) in April.

Changes in the Grayscale DeFi Fund (DEFG)

The Grayscale DeFi Fund (DEFG) also retained its existing components, but saw shifts in their weightings: Uniswap now accounts for 53.75%, MakerDAO 17.94%, Lido 12.68%, Aave 10.58%, and Synthetix 5.05%. These changes reflect ongoing evaluations of market dynamics and token performance within the decentralized finance space.

Rebalancing of the GSCPxE Fund and MATIC’s Removal

As part of the Grayscale Smart Contract Platform Ex-Ethereum Fund’s (GSCPxE Fund) rebalancing, Polygon (MATIC) was removed and disposed of. The restructured fund’s asset weights now align with the CoinDesk Smart Contract Platform Select ex ETH Index and consist of Solana (65.80%), Cardano (14.67%), Avalanche (10.70%), and Polkadot (8.83%). Proceeds from the MATIC sale were used to increase holdings in these assets, optimizing the fund’s performance potential in line with current market trends.

Market Repercussions and MATIC’s Decline

Polygon (MATIC) has been notably impacted by the broader crypto market’s volatility. Following its removal from the GSCPxE Fund, MATIC saw its price plunge by 34% over the past month. The token’s valuation rebounded slightly—by over 7% in a 24-hour period—after the release of favorable jobs data suggesting imminent rate cuts by the U.S. Federal Reserve. Despite this temporary recovery, MATIC’s trading volume has dropped 38%, and its market position remains precarious.

Potential Outlook for Polygon (MATIC)

The challenges for Polygon (MATIC) are underscored by its classification as a security by the U.S. Securities and Exchange Commission (SEC), contributing to its significant decline to a two-year low. Despite its standing as a prominent blockchain network, Polygon’s market influence has waned over the past year. Investors and stakeholders are now closely monitoring its trajectory and regulatory developments to gauge future performance.

Conclusion

Grayscale’s recent fund rebalancing, particularly the removal of Polygon (MATIC) from the GSCPxE Fund, underscores the dynamic nature of the crypto asset market. These adjustments aim to align with current market trends and optimize fund performance. While MATIC faces considerable challenges, the evolving crypto landscape continues to present opportunities and risks, necessitating vigilant observation and response from investors and market participants.