Bitwise Asset Management, creator of the HOLD 10 Private Index Fund, a cryptocurrency index fund formed last November, is now offering shares to selected self-directed IRAs.
The minimum investment is $25,000 and the IRA owners must be accredited investors, meaning they must have incomes over $200,000 (or $300,000 for a couple) in each of the past two years and expectations of the same for the current year or a net worth over $1 million excluding the value of their primary residence.
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The fund invests in the 10 largest cryptocurrencies on a market-weighted basis, rebalances monthly and charges a manager fee of 2.5%. It currently has 500 investors and is limited to a total of 2,000, under the regulations of the JOBS Act (Jumpstart Our Business Startup), which passed in 2012.
“We have a strong belief in the long-term potential for crypto assets, and in many ways, retirement accounts are a perfect place for people to invest in that potential and on that time scale,” said Hunter Horsley, CEO, Bitwise Asset Management, in a statement.
Why would investors saving for retirement want to own shares of a fund that invests in cryptocurrencies, among the most volatile assets available today, and one where Bitcoin alone accounts for about 50% of the AUM?
Matt Hougan, vice president of research and development at Bitwise who previously headed ETF.com, tells ThinkAdvisor, “We believe in the long-term potential of crypto assets to become significantly valued as the fuel to open, public blockchains. Think about it as early-stage VC investment in a nascent technology with limited applications now [that become] long-term applications.”
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Bitwise itself is backed by venture capital firms including Khosla Ventures and General Catalyst. It hopes to grow into an institutional crypto-asset manager that can eventually launch a public fund, said Hougan.
He suggests that investors consider the HOLD 10 Private Index Fund as an alternative asset class that’s negatively correlated to inflation and has a low correlation to other asset classes.
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“I’m not suggesting this for 10% to 20% of a portfolio, only single digit percentages … Having a small allocation to crypto can improve returns.”
It can also add volatility to accounts. On the same day that Bitwise announced the availability of the HOLD 10 Private Index Fund to selected IRA accounts, the S&P 500 gained 1.38% but Bitcoin prices dropped 7% to $7,403 after nearing $8,000 earlier in the day. The Bitcoin Investment Trust (GBTC), a grantor trust that trades like a closed-end fund, lost 6%, extending a losing streak for a sixth straight day.