weekly roundup – A16Z Doubling Size of Crypto Fund | Goldmans on Crypto | WisdomTree ETF | Galaxy Acquires Vision | Coinbase Prime Revamp
We dive into the highlights from the past week in crypto in our weekly roundup of industry news.
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RENOWNED INVESTORS CONFIRM INTEREST IN CRYPTO
Last week, the news that billionaire hedge fund manager Ray Dalio already owns bitcoin and that billionaire activist Carl Icahn is considering investing in bitcoin, brought further public attention to digital assets.
Dalio disclosed during Coindesk’s Consensus conference last Monday that he owns “some” bitcoin and called the cryptocurrency a better inflation hedge than bonds. But Dalio maintains that the cryptocurrency still faces risk. “Bitcoin’s greatest risk is its success,” he said. And if it succeeds, “one of the great things, I think, as a worry, is the government having the capacity to control bitcoin, or the digital currencies. They know where they are, and they know what’s going on.” At the same event, Wyoming Governor Mark Gordon also admitted that he holds some cryptocurrencies.
US billionaire and one-time cryptocurrency skeptic Carl Icahn is contemplating a potential $1.5bn investment in digital assets. The activist investor said he’s looking at investing in crypto in “a relatively big way,” clarifying that “big” could mean “a billion dollars, billion-and-a-half.” Icahn shared his thoughts via an interview on Wednesday with Bloomberg on topics including investor activism, GameStop shares and digital assets.
Venture giant Andreessen Horowitz (a16z) is doubling the size of its third crypto fund to $2 billion, according to venture capital writer Eric Newcomer. According to his 27th May newsletter, which covers technology venture funding, the Menlo Park, California-based firm will charge “a 2.5% management fee for most of the first decade of the fund,” which could lead to annual $50 million fees. The general partners will earn 25% of the profits, until the fund doubles and 30% for performance exceeding that threshold.
Last month, a report from the Financial Times indicated that the a16z-led crypto fund would draw anywhere from $800 million to $1 billion.
A16z has already poured a substantial amount of its capital into crypto startups, with a recent focus on network scaling and non-fungible tokens (NFT) marketplaces.
GOLDMAN SACHS: CRYPTO IS OFFICIALLY A NEW ASSET CLASS
In last week’s roundup, we mentioned the forthcoming report from Goldman Sachs about crypto as a new asset class, which has now been published.
“Bitcoin is now considered an investable asset. It has its own idiosyncratic risk, partly because it’s still relatively new and going through an adoption phase,” said Mathew McDermott, Goldman Sachs’ Global Head of Digital Assets, in the new research. “And it doesn’t behave as one would intuitively expect relative to other assets given the analogy to digital gold; to date, it’s tended to be more aligned with risk-on assets. But clients and beyond are largely treating it as a new asset class, which is notable – it’s not often that we get to witness the emergence of a new asset class.”
Goldman’s McDermott acknowledges regulation of the crypto space looms large as a significant risk to further price appreciation. Even in the face of such risk, McDermott said institutional clients remain keen on adding some form of crypto exposure to portfolios:
“As a whole, discussions with institutional clients revolve around how they can learn more on the topic and get access to the space – as opposed to questions around what bitcoin or cryptocurrencies are – which was really the main topic just a few years ago. But beyond that, asset managers and macro funds are interested in whether or not crypto fits into their portfolios, and if it does, how to get access to either the physical – by trading the spot instrument on a blockchain – or exposure through other types of products, typically futures,” McDermott explained. “Hedge funds, perhaps unsurprisingly, are more active in this space, and are particularly interested in profiting from the structural liquidity play inherent in the market – earning the basis between going long either the physical or an instrument that provides access on a spot basis to the underlying asset and shorting the future.”
WISDOMTREE BECOMES THE SECOND TO FILE FOR AN ETH ETF WITH THE SEC
WisdomTree has filed for an exchange-traded fund (ETF) based on ether, according to a new S-1filed with the Securities and Exchange Commission.
The so-called WisdomTree Ethereum Trust plans to list on Cboe BZX Exchange, the same venue it plans to list shares of its proposed bitcoin ETF. The proposal will be updated as it goes forward, but so far it’s yet to settle on a ticker or a custodian. Delaware Trust Company is the proposed trustee.
The ETF is a vehicle for gaining exposure to the price of ether with shares priced by the CF-Ether-Dollar US Settlement Price. As the filing notes: “As the Shares are listed on the Exchange, investors can indirectly invest in a portfolio comprised of ether through a traditional brokerage account. The Trust provides investors with the opportunity to access the market for ether through a traditional brokerage account without the potential barriers to entry or risks involved with holding or transferring ether directly, acquiring it from an ether exchange, or mining it.”
WisdomTree is the second to apply for an ETH ETF, following VanEck’s submission last month. Both entities plan to list on Cboe and have bitcoin ETF proposals before the regulator that they also plan to list on Cboe. Still, the SEC has yet to approve any crypto ETF offering, and many bitcoin ETFs have been stopped short of approval by the agency.
COINBASE LAUNCHES REVAMPED PRIME BROKERAGE SERVICES
Coinbase first launched Prime for institutional investors in May 2018 when those investors were beginning to enter the crypto space and is adding new services to its prime brokerage offering in response to client demand.
The revamped version of Coinbase Prime will offer new features, including easier transfers between segregated cold storage and trading balance, and access to more venues for deep liquidity. It will also feature smart order routing, which will automatically route orders to the venue with the best all-in prices.
“We are bringing trading, algos, smart order routing, along with one of the strongest custody offerings in the industry; building our institutional product suite to provide institutions with the most seamless, intuitive, and trusted solution to manage crypto assets,” said Brett Tejpaul, Head of Institutional Sales, Trading, Custody and Prime Services at Coinbase. “Clients coming from other asset classes are looking for a bundling of services and Coinbase Prime does that.”
Skew, a crypto data visualisation and analytics platform that Coinbase acquired last month will support Coinbase Prime and allow for real-time tracking of spot and derivatives, fulfilling an essential data requirement for traders.
“Advanced traders need more complex tooling, trading features, and reporting — we are proud to bring them that and much more with the launch of Coinbase Prime,” Coinbase wrote in a blog post Tuesday.
GALAXY ACQUIRES VISION HILL TO EXPAND INSTITUTIONAL OFFERING
Galaxy Digital Asset Management has announced the acquisition of digital asset investment consulting group Vision Hill to expand their institutional offerings.
The acquisition allows Galaxy Fund Management to expand its services and provide institutional-grade crypto fund-of-funds and investment consulting solutions for institutional allocators, including pensions, endowments and foundations, Steve Kurz, Partner and Head of Asset Management at Galaxy, said: “As these investors navigate what is often their first allocation to the asset class, Galaxy felt it was important to complement its existing suite of passive products with diversified, actively managed investment vehicles.”
As part of the acquisition, Galaxy will also offer VisionTrack and the Vision Hill Crypto Hedge Fund Indices. VisionTrack is a crypto buy-side market intelligence database that covers 850 hedge and venture funds. The platform helps investors to make informed allocation decisions.
Despite the recent large swings in the market, Galaxy maintains that crypto is a store of value and a must-have in any diversified portfolio. “We believe bitcoin functions as ‘digital gold’ in an investment portfolio,” said Kurz. “The fiscal and monetary profligacy of policymakers around the globe is well documented; our view is that hard assets — including bitcoin, gold, and real estate — will serve as an important macro hedge function in portfolios.”
GUEST BLOG: A PRIMER ON STABLECOINS
Last week we published our latest guest blog, penned by Jannah Patchay, Director and Regulatory Advocacy Ambassador of the London Blockchain Foundation. We take a look at stablecoins, their structures, uses, key considerations and challenges for users, and the way in which they are regulated.