Hashdex will reduce cost of funds through cryptocurrency staking
CriptoFácil – The Brazilian manager Hashdex will start staking cryptocurrencies in order to reverse the income obtained in advantages for investors of its crypto funds. Staking is a service that allows cryptocurrency holders to lock their assets on a blockchain to promote network security. In return, the “stakers” receive rewards in crypto.
Hashdex’s idea is to revert these rewards to crypto funds, reducing management fees and consequently impacting the final profitability of the funds. As reported by Hashdex to Valor, in some cases, fees may be zero.
Staking revenues may outperform costs of Hashdex ETFs
This is the case of Hashdex’s ETHE11 fund which has 100% equity in Ether (). According to Hashdex CIO Samir Kerbage, the revenue generated from ETH staking can be substantially higher than the ETF costs. That is, the product may outperform Ether itself, which is the ETF’s benchmark index. Today, the ETHE11 management fee is 0.7% and can go as low as zero.
It is worth noting that not all Hashdex funds may have their fees reduced. This is because staking is only possible on “Proof of Stake” (PoS) networks such as the . Therefore, products that invest in (BTC), for example, whose consensus algorithm is Proof-of-Work (PoW), with mining, will not benefit from token staking.
In addition, new operations should only start to take place from April 12th, when there will be a software update for Ethereum Shanghai. With this update, it will be possible to withdraw the ETH blocked in staking.
“Before that, it was not possible to join staking. As tokens are released for withdrawals, we can participate in this type of application. Our goal is to reduce the cost of funds for shareholders as much as possible,” said Hashdex’s Kerbage.
Brazil’s largest cryptocurrency ETF will benefit from staking
In addition to ETHE11, the main ETF benefiting from staking, another fund that could see a significant reduction in fees is HASH11 (BVMF:). This is the largest cryptocurrency ETF in Brazil and the second largest in number of B3 (BVMF:) shareholders.
As reported by Hashdex, staking part of the ETH could reduce between 40% and 80% the impact of the 1.3% management fee on the fund’s final return. Today, this ETF has almost 30% of its equity invested in Ether.
Finally, Hashdex reported that the staking operation depends on complex liquidity management. In addition, the process should take into account the expectation of possible withdrawals by fund shareholders. After all, ETFs cannot stake all eligible tokens as there is no immediate liquidity. For Kerbage, hardly more than 50% of a fund’s eligible tokens will be able to proceed to staking.
By CriptoFacil