By
Josh O'Sullivan
April 30th, 2024
Grayscale Investments, a subsidiary of Digital Currency Group (DCG), announced on Thursday that it has henceforth dropped ADA and ATOM from its Grayscale Digital Large Cup Fund.
As a result, the Grayscale’s GDLC will continue to hold Bitcoin (BTC) at 70.96 percent, Ethereum (ETH) at 21.84 percent, Solana (SOL) at 4.52 percent, XRP at 1.73 percent, and Avalanche (AVAX) at 0.95 percent.
Notably, the decision came after the rebalancing of funds for the first quarter of 2024, which also impacted the Grayscale DeFi Fund (OTCQB: DEFG), and Grayscale Smart Contract Platform Ex-Ethereum Fund (GSCPxE Fund).
At the end of the day on 4/3/2024, Grayscale Digital Large Cap Fund’s Fund Components were a basket of the following assets and weightings. As a result of the rebalancing, Cardano $ADA has been removed. https://t.co/o5jJz3NKs0$BTC $ETH $SOL $XRP $AVAX (3/6) pic.twitter.com/qVymu05BKw
— Grayscale (@Grayscale) April 4, 2024
Why Cardano?
The removal of Cardano from Grayscale’s GDLC did not resonate well with the ADA community. Furthermore, the Cardano network is a fast-growing web3 ecosystem with scalable smart contracts. As of this report, the Cardano network had about $370 million in total value locked (TVL) and more than $20 million in stablecoins market cap.
The Cardano network has been improving its performance in a bid to match up with other layer-one ecosystems like Solana and Ethereum. For instance, the Cardano core developers intend to enable an upgrade that will allow ADA hot wallets to sign on-chain messages.
Message signing in general is a very useful thing
It allows proving address ownership without on-chain transactions
Useful for
– Using L2 wallets from L1 accounts (Catalyst, Milkomeda, Mithril)
– "Login with Cardano" on websites (edit your profile on jpg store)and more
— Sebastien Guillemot (@SebastienGllmt) March 31, 2024
However, Grayscale’s GDLC rebalancing, which relies on respective assets’ trading volume, opted to oust ADA. According to the latest market data, Cardano had a daily reported trading volume of about $495 million and a fully diluted valuation of about $20 billion. However, the Cardano network registered only $7 million in daily trading volume for its decentralized financial (DeFi) ecosystem.
It's volume related. There's an equation. We'll be back on our way to #1. https://t.co/uhILC7cnSM
— St₳kΣ with Pride 🌈 (@StakeWithPride) April 5, 2024
Meanwhile, Cardano is still available on Grayscale Smart Contract Platform Ex-Ethereum Fund at 14.56 percent, and second from Solana with 58.41 percent. The Grayscale Smart Contract Platform Ex-Ethereum Fund is small, with about $4.7 million in assets under management, compared to the GDLC.
Impact on ADA Price Action
After experiencing heavy resistance around the 200 weekly Moving Average (MA), the ADA price has been trapped in a choppy situation. The large-cap altcoin aiming to dethrone Ethereum as the web3 leader, dropped more than 3 percent to trade around 56 cents on Friday.
Nevertheless, ADA price has not yet invalidated the macro bullish outlook despite the ongoing consolidation. From a technical perspective, ADA price has been forming higher highs and higher lows on the weekly time frame, an established characteristic of a rising trend.
Unless ADA price falls below the crucial support level of around 44 cents in the coming weeks, the altcoin is well positioned to retest its all-time high (ATH) in the coming months.