Cryptocurrency investment funds to rise with the tide
The market for cryptocurrencies itself has ballooned over the past year from a humble 18.8 billion to over $300 billion now. Bitcoin alone has surged from a $15.6 billion market to a $167.7 billion market currently; rising 10 times in value (from under $1,000 a year ago, to over $10,000 currently). The digital currency market has been attracting many asset managers and hedge funds into the space, as they launch their own standalone cryptocurrency investment funds to rise with the tide.
Gaining indirect exposure to cryptocurrencies
For those who seek to gain exposure to the cryptocurrency market without investing in specific digital currencies, there are not any exchange-traded funds in the US that currently offer exclusive exposure to cryptocurrencies. However, there are these 3 US-based funds, which are currently under review by the SEC (in order of their filing):
- COIN from Winklevoss Bitcoin Trust
- XBTC from SolidX Bitcoin Trust
- GBTC from Bitcoin Investment Trust
The only ETFs that offer exposure to the space are the Ark Investment Management’s ARK Innovation ETF (ARKK) and the ARK Web x.0 ETF (ARKW), but these are far from official cryptocurrency ETFs as these funds have just about 5-6% portfolio exposure to the Bitcoin Investment Trust (GBTC).
5 of the largest cryptocurrency investment funds
There are a number of investment funds offering exposure to the cryptocurrency segment, but many have not taken an overly public stance. The following is a quick list of 5 of the largest that have been publicly announced.
- Grayscale’s Bitcoin Investment Trust (GBTC): $1.1 Billion market leader
Launched on September 25, 2013, and trading under the symbol GBTC on the US OTC market, the fund is one of Grayscale’s digital currency-based product offerings. With about $1.1 billion in total assets and NAV (net asset value) up 64.7% over the past 3 months (as of November 30), this fund is undoubtedly the largest and the most actively traded fund currently in the cryptocurrency space. The fund’s Bitcoin holdings are up over 6,900% since the fund’s inception, 1,200%+ up over the past year, and 114% up over the past 3 months. The fund doesn’t allow redemption of shares into Bitcoin.
In its current state, the GBTC is a hybrid, that is, an ETN which is filing to become an ETF. The fund has filed with the SEC for a $500 million IPO on the NYSE Arca to become an ETF. The fund is managed by Barry E. Silbert and carries an expense ratio of 2%. As of November 30, the fund commanded a market cap of $2.6 billion on the US exchange.
Other cryptocurrency funds from the Grayscale stable include the Ethereum Classic Investment Trust and the Zcash Investment Trust with $37.6 million and $12.9 million assets under management, respectively. Annual fees for these funds stand at 3% and 2.5%, respectively. Since inception, these funds are up 538.6% (since April 2017) and 36% (since October 2017), respectively. The company has already commenced the process to trade it’s Ethereum Classic Investment Trust Shares on the US OTC market.
- Polychain Capital Fund: $102.2 million in blockchain assets
Founded in 2016, this US-based hedge fund with about $102.2 million in investments (according to CrunchBase data), manages a portfolio of blockchain assets including different cryptocurrencies, assets, and digital tokens. Being a private fund, there is little information available on the fund.
- The Logos Fund: one-of-its-kind $100 million Bitcoin mining fund
The Logos Fund, the world’s first “bitcoin mining fund” specializes in cryptocurrency mining. It is a private fund that offers a blend of bitcoin mining and buy-and-hold investing. The fund is dedicated to investing in a range of Bitcoin-related businesses. The fund was created by Marco Streng, founder of hosted cloud mining company Genesis Mining, and has around $100 million in estimated funding. Genesis Mining is an initial partner to the fund.
- Pantera ICO Fund LP: a $100 million ICO-only fund
In June 2017, Pantera Capital launched a hedge fund focused on investments solely in tokens that power public blockchain protocols. The fund is run by Pantera CEO Dan Morehead and Augur co-founder Joey Krug. The fund is open only to US institutions and individuals.
- Arrington XRP Capital: a cryptocurrency hedge fund
This is one of the latest entrants among cryptocurrency investment funds. Launched on November 28, by Michael Arrington, founder of TechCrunch and CrunchFund, this new $100 million cryptocurrency hedge fund is called Arrington XRP Capital. The fund has commitments from investors for over $50 million already, and they plan to begin trading in the next few weeks. The fund is denominated in Ripple’s XRP, which means that investors would contribute XRP to the fund, not dollars or fiat currency, and all distributions, fees, etc. will also generally be paid in XRP. However, the fund will invest in a wide variety of cryptocurrency assets and Initial Coin Offerings (ICOs) as well as private equity offerings, with the primary focus being on existing tokens.
Others on the way…..
A $500 million fund: Hedge fund Galaxy Investment Partners’ CEO, Michael Novogratz, recently revealed his intent to start a $500 million fund to invest in cryptocurrencies. Through his Galaxy Digital Assets Fund, Novogratz plans on offering exposure in what he calls “the largest bubble of our lifetimes.” Reportedly, Novogratz would contribute $150 million of his own assets and will seek to raise another $350 million from family offices, high net-worth individuals, and other hedge fund managers.
Fund of funds: Venture capitalist Rick Marini intends to raise $100 million to invest in 10 crypto-focused hedge funds including MetaStable Capital and Neural Capital. The fund-of-funds, called Protocol Ventures, highlights the growing appetite for investors in the crypto space. A total of 84 crypto hedge funds have opened thus far in 2017, a jump from 11 that existed in 2016.