- Cardano weighs the highest in Grayscale’s smart contract fund which gives the crypto greater visibility to institutional players.
- Cardano’s CIP50 coming along with Voltaire era next year could also solve the issue of governance with ADA cold storage by private players.
The world’s largest crypto asset manager Grayscale Investments sought exposure to Cardano (ADA) last year amid strong demand from investors. Interestingly, Grayscale also made Cardano (ADA) its third-largest holding.
Earlier this year, Grayscale launched its smart contracts fund which featured ADA among its largest holdings. So far, Cardano (ADA) has successfully maintained its position of having the largest weightage in the Grayscale smart contracts fund.
The Cardano ADA’s weightage in the fund has been increased by four percentage points since the launch. It alone makes up 28.25 percent of the entire fund. Cardano’s ADA has 6 percent more weightage in the Grayscale smart contracts fund in comparison to the next competitor Solana.
As we know, Grayscale is the world’s largest crypto asset manager. Thus, being on top of the smart contracts fund will certainly give Cardano (ADA) a lot more visibility among big institutional investors. This could also mean a massive capital inflow coming to Cardano in the future.
A Twitter user ThisCorrosion noted: “In the next year or 2 we will most likely see massive institutional and personal investment capital flowing in through these funds. Uncertainty in regulation is probably the biggest factor holding it back now”. The user expects giants like Vanguard and iShares to participate in these funds.
Some concerns and solutions
ThisCorrosion, however, expressed concern with Grayscale storing all of its ADA purchases in the Coinbase cold storage. The user adds that in this case, Coinbase controls the user keys and thus has too much control over ADA governance. Furthermore, these institutions are missing out on enough returns with their staked assets on Coinabase against what they would have earned with stake pool operators (SPOs).
The user ThisCorrosion adds that institutional players should recognize the unique benefits that digital assets offer over commodities. “Hopefully institutional investment firms see that Cardano is a unique investment and requires different approaches than commodities such as gold. If we manage to get their attention, maybe @cardano_whale can show them the error of their ways,” he stated.
While the user’s concerns are valid, the Cardano network could be having a fix in the Voltaire phase of its roadmap. This phase focuses mainly on governance and will allow the network to function with the Input Out Global management. The Voltaire phase of Cardano will kick off sometime in 2023.
The fix for the ADA governance problem will come with Cardano Improvement Proposal number 50 (CIP-50). Dr. Michael Liesenfelt, a research assistant professor at the University of Tennessee said: “CIP50 would benefit these institutional stakeholders while requiring a bit of pledge. Those institutions could also choose to follow @Cardano_CF‘s example, delegating 675M to dozens of international pool operators instead of centralizing stake in private pools”.
Cardano’s ADA has been subject to massive correction in the crypto winter of 2022. However, any positive development could set the ADA price to surge higher. ADA is currently trading at $0.39 with a market cap of $13.5 billion.
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