Bad News – Institutions Can Be Invested In Crypto

Many investors or cryptocurrency-lovers are expecting, better regulation of this sector can ease the entering of big institutional investors to the market. Possibly providing huge amounts of new capital, liquidity and drive crypto-prices to new, incredible highs. Some are speaking of “Tens of trillions of dollars”. (Like here.)

Institutional limits

That is, of course, possible. Most institutional investors have own rules, like some ETF-s (exchange traded funds) only investing in titles with with at least BBB rating or better, choosing only “investment grade”. Others have other rules, are limiting some products or eliminating them totally from the list of possible portfolio-elements.

(Photo: Pixabay)
Many of them can’t invest in shares or other products not listed in official exchanges, so must stay away from over-the-counter (OTC) products. Some of them can’t invest in futures, like the Bitcoin futures on CME and CBOE, or the highly desired Ethereum futures.

Hedge funds are invested

And some institutional investors will never invest in cryptos, simply because that is not their purpose. Cryptos aren’t fitting in their portfolio. A bond fund or a stock fund has no reason to do so.

But many “institutions”, in first place risk seeking hedge funds already found earlier solutions to invest in cryptos. May be not all of them, but some made special funds to invest in this branch to evade limitations. So, better regulations sure can help, but may be not so much like many investors are expecting. Bloomberg wrote many times about cryptocurrency hedge funds this year

Investment trusts and certificates

There are other legal “conventional” ways also to buy cryptos, like products of Grayscale.co in the US. They have so called investment trusts, in the above mentioned OTC trading: Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Zcash, Ripple, and a multi-crypto diversified “Digital Large Cap Fund”.

In Europe, the company Xbtprovider.com is operating two ETN-like certificates on the Nasdaq Stockholm Exchange. The Bitcoin Tracker and the Ether Tracker, both in Swedish Krones and Euros. In the German Xetra system, you can buy some certificates of Vontobel Bank, with Bitcoin and Bitcoin Cash exposure.

Crypto-shares are here

Many institutional and private investors are thinking, the many different cryptos can come and go, some will disappear, and some new ones can rise quickly from nothing, just like in the past. See here examples in my previous post. For this reason you should invest preferably in shares of crypto-focused companies with positive future earnings and cash flow.

There are some ETF-s of crypto– or blockchain-related companies, like Amplify Transformational Data Sharing (BLOK) or Reality Shares Nasdaq NexGen Economy ETF (BLCN). And some other ones, also in Canada.

How many fees can you afford?

Coindesk and other sources announced on June 13, 2018, “Coinbase has formally launched a new index fund product aimed at large investors”. The Coinbase Index Fund is open for investments with a minimum of $250,000. Some weeks earlier started also the Bitwise HOLD 10 Private Index Fund, with the 10 largest capitalization cryptos in its portfolio.

How many management fees, brokerage fees, margins between offer and bid on stock exchanges you pay if you buy this products, is an other question. Many crypto-enthusiasts may prefer a good cold wallet to hold the private keys. But many other investors think different, are not familiar with the complicated security requirements. So all this products can be essential in the process of adoption of the cryptos and the blockchain.
My previous complains about the difficult handling of cryptos here.

If you know other funds, certificates, investment products, please, comment.