As Bitcoin broke the psychological $20,000 barrier in mid-December last year, an equally astounding development took place: A relatively unknown digital-asset fund witnessed its share price jump 369% higher than the value of the Bitcoin and Ether tokens in its portfolio. The Bitwise 10 Crypto Index Fund (ticker: BITW) claims to provide investors with diversified exposure to bitcoin and other choice cryptocurrencies. It does this by tracking an Index composed of 10 cryptocurrencies identified according to specific criteria. During bitcoin’s bull run over the holidays, investor interest in bitcoin and crypto-related investments grew so dramatically that some acceded to heftier premiums to gain access to BITW’s crypto exposure, instead of simply acquiring its portfolio contents at a lower price. As a result, not only did BITW see increased share prices – it also set a record for initial trading volumes. Bitwise Asset Management, fund manager of BITW, claims more than $67 million worth of shares were traded within its first three days of trading in the secondary market. This performance represents the highest volume debut of a publicly-traded crypto fund in U.S. history.
“We are thrilled to see the market’s reception of BITW as the first publicly traded crypto index fund,” said Bitwise co-founder and CEO Hunter Horsley of the fund’s landmark debut.
“As more and more financial advisors and investment professionals look to establish an allocation to crypto in their portfolios, a professionally managed index fund is a familiar and important tool,” he added.
Riding the Wave
The momentum Bitwise has built at the end of 2020 seems to have carried over to 2021, if its recent performance is any indication. In a January press release, the fund management company announced that it had recently exceeded $500 million in assets under management. From its crypto portfolio, the company reports BITW as the most sought-after fund, surpassing $400 million in assets under management. Aside from BITW, the Bitwise Bitcoin Fund and Bitwise Ethereum Fund have also enjoyed growing demand. According to Bitwise, the last quarter of 2020 registered record inflows into its funds, amounting to more than the total cumulative inflows it had recorded for 2018 and 2019 combined. The company attributes a significant portion of the inflow to its core audience, which includes financial advisors, hedge funds, and institutional investors.
“The speed at which professional investors are moving into crypto right now is remarkable,” noted Mr. Horsley.
Positive Investor Perception
This rapid increase in investment coincides with data suggesting an increasingly positive investor attitude towards bitcoin. In its 2020 investor study, digital currency asset manager Grayscale Investments reveals 55% of investors in the United States could potentially stand as bitcoin investors in the future. The annual report, which the firm conducts with financial market thinktank 8 Acre Perspective, identifies this as a marked increase in investor interest from 2019, when only 36% of investors were open to the idea of investing in bitcoin. Michael Sonnenshein, Managing Director at Grayscale Investments, believes mainstream adoption of bitcoin by trusted institutions such as PayPal, Square, and MicroStrategy contributed largely to the change in investor perception. The data in the study reflects the same sentiment, as almost half of respondents reportedly believe digital currencies will enjoy mainstream adoption by the end of the decade. Worth noting as well is the fact that 79% of those identified as prospective bitcoin investors point at potential growth as a motivating factor for their decision.
“This data makes it clear that investor interest in Bitcoin grew substantially in 2020. As investors become more familiar with Bitcoin and better understand the role it can play in a diversified portfolio, they are more likely to invest,” says Mr. Sonnenshein.
Crypto Tokens: Investment and Security
For those looking to capitalise on cryptocurrency, experts advise fully understanding the nature and fundamental principles of this emergent asset class to enable facts-based decision making. One fundamental principle to keep in mind is that cryptocurrency is a digital asset. Transactions are initiated, accomplished, and secured within the digital space. Additionally, price action in the cryptocurrency market is volatile, which offers incredible potential for earning profits. To take advantage of these market movements, it is best to do extensive research on the assets that offer positive potential and utilise all available data to make an informed decision. Thirdly, diversification is essential when developing an investment strategy. This provides a buffer for any sudden changes in asset valuation. In terms of securing crypto assets, on the other hand, there are also key measures to take in order to safekeep one’s digital investments. For instance, in the cryptocurrency market, investor anonymity is kept encrypted behind a unique alpha-numeric ‘key’, which can be used to send or receive crypto tokens from other cryptocurrency addresses. Similar to a physical wallet, investors are advised to never share their keys to anyone, anywhere. If it must be written down for reference, the physical copy should be kept in a secure and locked place. It is also advisable to transfer any crypto coins that one has invested in from crypto exchanges to a personal digital wallet. This will add another layer of security and privacy to one’s crypto investments.
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Author: Albert Navarrete
