Pundit Claims Hashdex Index ETF Will Buy 215K+ XRP for Every New 1,000 Shares, But Theres a Catch

Crypto commentator Chad Steingraber claims that the Hashdex Nasdaq Crypto Index ETF would purchase 215,854 XRP for every 1,000 new shares created.

The prominent XRP community figure recently made this bold statement on X, while discussing the latest crypto ETF developments. Steingrabers comments have stirred quite a bit of discussion within the crypto community.

According to information from Hashdexs website, the Hashdex Nasdaq Crypto Index ETF (HDEX.BH), which tracks the Nasdaq Crypto Index (NCI), contains a variety of cryptocurrencies with different weightings. Bitcoin holds the largest share at 64.33%, followed by Ethereum at 26.08%, Solana at 5.26%, and XRP at 1.48%.

Claims of XRP Purchase

The ETF currently has 79,579 shares outstanding, each valued at a net asset value (NAV) of $7,008. Based on the current price of XRP at approximately $0.4714 per token, each share holds about 215.85 XRP, worth around $101.7. This means XRP makes up 1.48% of the ETFs holdings.

Steingraber claimed that at the rate of 215.85 XRP per share, the creation of 1,000 new shares would lead to the purchase of 215,854 XRP, regardless of the token‘s price at the time. He emphasized that the fund’s supposed cash create model would require it to buy the underlying assets from the market when new shares are issued.

Since these funds will be “Cash Creates” – that means when NEW shares are created, the fund uses the cash to buy the underlying assets from the market.

As an example, if 1,000 new shares are made – the fund would then be buying 215,854 XRP NO MATTER THE CURRENT PRICE ????

— Chad Steingraber (@ChadSteingraber) July 1, 2024

However, a closer examination reveals a crucial situation that Steingraber may have overlooked. The Hashdex Crypto Index ETF operates under an in-kind redemption model, not a cash create one.

This means that instead of purchasing additional XRP from the market when new shares are created, the fund exchanges assets to create these new shares. This model helps maintain the funds balance without exerting additional market pressure by buying more XRP.

An Erroneous Conflation

Notably, Steingrabers commentary conflated the existing Hashdex Nasdaq Crypto Index ETF with the soon-to-be-launched Hashdex Nasdaq Crypto Index US ETF. The US-based product, which the SEC recently acknowledged in its 19b-4 filing, follows a different structure and regulatory framework than its predecessor.

For context, Hashdex introduced the existing Hashdex Nasdaq Crypto Index ETF in February 2021, launching it for trading on the Bermuda Stock Exchange. The product has been trading ever since, boasting a returns rate of 66.97% since launch. The product is up 93.60% over the last year.

The forthcoming Hashdex Nasdaq Crypto Index US ETF is expected to cater primarily to US citizens. Notably, while the fund does feature a cash create redemption model, it does not hold XRP or any other asset besides Bitcoin and Ethereum.