Key Insights
- Grayscale allocated 30.6% of its Smart Contract Fund to BNB, the largest component of its portfolio.
- The greatest drop was for Cardano, with EVM and Solana being close to 29% respectively.
- Additionally, the quarterly review added more to Ondo’s stake in the DeFi Fund, and maintained Near Protocol as the top holding in the AI Fund.
Grayscale has rebalanced one of its flagship crypto investment products by making BNB the top asset in its Smart Contract Fund following the second quarter of the portfolio rebalance. The move pushed Ethereum and Solana into second and third positions while reducing exposure to several smaller smart contract networks.
The rebalance became effective on August 3 and was announced on August 5. It reflects changes required under the fund’s index methodology rather than an active prediction that one blockchain will outperform another.
Smart Contract Fund Holdings Weight After Rebalance
BNB 30.60%
Ethereum 29.47%
Solana 29.15%
Cardano 4.88%
Hedera 2.08%
Avalanche 1.92%
Sui 1.90%
BNB enters the portfolio and immediately takes the lead
Grayscale introduced BNB into the Smart Contract Fund by selling existing holdings in proportion to their previous allocations before purchasing the new position.
The adjustment gave BNB a 30.6% weighting, placing it slightly ahead of Ethereum at 29.47% and Solana at 29.15%.
The biggest reduction affected Cardano. Its allocation dropped from 17.96% during the previous review to 4.88%. Hedera, Avalanche, and Sui also recorded significant cuts, with each falling below 2.1%.
Earlier in the year, Ethereum and Solana occupied the two largest positions, while Cardano ranked third. The latest review reshaped that order without materially reducing Ethereum or Solana.
Grayscale emphasized that the portfolio follows the CoinDesk Smart Contract Platform Select Capped Index. Consequently, the allocations result from index rules rather than discretionary investment decisions.
Quarterly methodology continues to guide allocations
The Smart Contract Fund tracks eligible smart contract platforms using a market capitalization-weighted index with position limits.
Assets must satisfy liquidity, custody, and classification requirements before qualifying for inclusion. The portfolio also changes continuously because market prices influence daily weightings between scheduled quarterly reviews.
As a result, the published allocations represent a snapshot following the August rebalance instead of permanent target weights.
Grayscale also reminded investors that the fund differs from an exchange-traded fund. The company intends to pursue secondary market quotation for the shares, although regulatory approval remains uncertain.
The investment manager also noted that the product is not registered under the Investment Company Act of 1940. Therefore, investors should expect different protections and liquidity characteristics compared with traditional registered investment funds.
DeFi and AI funds also receive fresh allocations
The quarterly review extended beyond the Smart Contract Fund.
In the DeFi Fund, Grayscale cut down on its holdings in Uniswap but still held on to the token as the top holding at 34.16%.
The rebalance was most beneficial to Ondo. Its weight rose from 19.83% to 25.44% making it the second biggest asset of the fund. Aave, Ethena, Curve and Lido DAO rounded it out.
The Decentralized AI Fund also experienced some changes.
While Grayscale sold some of its holdings of Near Protocol, NEAR was still the biggest holding at 31.35%. Bittensor followed with 29.15%, while Render and Filecoin retained the remaining portfolio shares.
The partial sale should not be interpreted as a reduction in confidence because NEAR still represents almost one-third of the AI-focused fund.
Institutional strategy extends beyond fund management
The latest rebalance arrives while Grayscale continues expanding its investment offerings.
The company is separately pursuing regulatory approval for a spot BNB exchange-traded fund in the United States. Earlier regulatory filings identified the proposed Nasdaq ticker as GBNB, with BitGo serving as custodian and BNY Mellon acting as administrator and transfer agent.
However, the proposed ETF remains separate from the Smart Contract Fund. The addition of BNB to the diversified portfolio is not an approval of the stand-alone ETF application.
The wider rebalance also highlights that the crypto investment products offered by institutions are continually evolving as new blockchain ecosystems continue to qualify for existing index frameworks. Grayscale does not make concentrated bets, but rather makes adjustments based on rules it has pre-defined, but exposure is diversified across various sectors of the blockchain space.
Conclusion
Grayscale has substantially updated its Smart Contract Fund, adding on BNB as the biggest holding while maintaining relevant exposure to Ethereum and Solana. The review also fine-tuned allocations between the firm’s DeFi and AI funds, which are essentially the same as those in the previous review. The market performance in 2023 will be a test of BNB’s leadership role, as Grayscale keeps rolling out regulated crypto investment products quarterly.
