The year has just begun and Bitcoin is becoming one of the hottest investments around.
Prices surged almost 300% in 2020 followed by another 19% gain on Jan. 2, before giving back much of that gain in trading on Monday morning.
Hours later, Anthony Scaramucci’s SkyBridge Capital formally launched the SkyBridge Bitcoin Fund, a limited partnership that is available to accredited investors for a minimum $50,000 investment. Scaramucci says the fund will trade at net asset value, unlike the Grayscale Bitcoin Trust which often trades at a premium, and it carries a 0.75% fee. Fidelity Investments is the custodian.
“We believe Bitcoin is in its early innings as an exciting new asset class,” said Scaramucci in a statement. “With the institutional quality custody solutions available today, we believe the time is right to allocate capital and provide our clients access to the digital assets space.”
He tells ThinkAdvisor that the fund, seeded with $25 million of the firm’s capital, is targeting $500 million and individuals who can buy and hold the cryptocurrency for a minimum three months. Despite its volatility, which is expected, Bitcoin will be considered a store of value over and has a place in individuals’ portfolios, Scaramucci said. “There’s a lot of institutional demand … and only 2 million coins left to be mined. They can’t be created.”
RIAs who can’t own coins outright due to regulatory issues can buy into the investment partnership to own the coin, Scaramucci said.
They can also invest client funds into the Bitwise 10 Crypto Index Fund (BITW), an open-ended publicly traded statutory trust that launched in December on the OTCQX over-the-counter marketplace, at approximately $25 a share and $120 million in assets. Its share price has more than doubled to about $53.50 in after trading on Monday, and assets have surged to more than $500 million. It is currently trading at a 145% premium.
VanEck’s Latest Bitcoin Trust ETF Application
Waiting in the wings is a new Bitcoin Trust ETF from VanEck, which filed a registration statement with the Securities and Exchange Commission. The SEC has rejected all previous cryptocurrency ETF applications, including two from VanEck — one a ‘40 Act futures-based ETF and another effort, in partnership with SolidX, for a “physical” Bitcoin product. In the latest filing, VanEck is the ETF sponsor.
“It is not surprising to see VanEck renew its Bitcoin ETF filing on the heels of Jay Clayton’s departure, who seemed to be quite skeptical of a Bitcoin ETF,” said Chris Kuiper, vice president at CFRA, adding that VanEck withdrew its previous application about a year ago when it was clear the SEC still had some issues with it.
“While I can’t comment on the likelihood of this one being accepted, I will say the environment has become more favorable, and not because of the potential changeover at the SEC, but because the infrastructure and size of the bitcoin market has grown and developed tremendously,” Kulper said. “We now have large publicly traded companies purchasing Bitcoin and holding them on their balance sheets (MicroStrategy and Square for example) … [and] the OCC confirming [that] banks may provide custody services for Bitcoin is a very big and notable development.”
— Check out 11 Reasons Advisors Should Rethink Bitcoin on ThinkAdvisor.