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Investing in Bitcoin: Smaller Funds Dominate, Institutional Investors Stay on the Sidelines

Last Updated March 4, 2021 4:47 PM
Lester Coleman
Last Updated March 4, 2021 4:47 PM

From an investment perspective, bitcoin mainly exists in funds held by smaller investors as larger investors remain a bit wary, according to Reuters .

Jeremy Millar, the founder and managing partner at Ledger Partners in London, estimated 50% to 90% of bitcoin’s total $6.4 billion market is invested in “near institutional” funds held by individuals at hedge funds and family offices.

Pantera Leads In Bitcoin

The largest fund to hold bitcoin is the Pantera Bitcoin Fund, a $160 million hedge fund.

The currency’s earlier ties to gambling and criminal websites did not endear it to traditional investors.

Millar did not have estimates for the amount of bitcoin held in institutional investments, but he said such holdings are likely to be insignificant compared to smaller investors who have fewer restrictions on fund allocation.

“What is clear though is that over the last two years, bitcoin has emerged from its ‘hacktivist’ origins to a more institutionalized ecosystem which includes the participation of hedge funds, traders, and professional investors,” said Millar.

The Pantera Bitcoin Fund, a San Francisco, Calif.-based hedge fund founded in 2013 by Dan Morehead, is available to individuals with $50,000 or more to invest. A fund brochure indicates when the fund launched in July 2013, bitcoin BTC=BTSP traded at around $65. On Thursday, it traded at $418.80, marking a gain of more than 500 percent from July 2013. Pantera did not comment on fund performance or its investors. Morehead formerly worked at Tiger Management in New York, N.Y.

Most of Pantera Fund’s investors are family offices and high net worth individuals, according to people familiar with the fund.

Grayscale Among Top Holders

The Grayscale Bitcoin Investment Trust (GBTC) is the only publicly-traded U.S. security in the over-the-counter market invested in the cryptocurrency and has assets of more than $60 million. Bitcoin advocate Barry Silbert and his Digital Currency Group back GBTC.

According to Thomson Reuters, a few thousand GBTC shares trade daily.

Antonis Polemitis, managing director at Ledra Capital in New York, said clients have allocated 1 to 3 percent of their portfolios to bitcoin. He said a 1 percent loss does not change anyone’s life in any way. Ledra Capital specializes in education and technology.

Some investment managers said bitcoin has helped portfolio performance.

ARK Invest in New York holds GBTC in its $12 million Next Generation Internet ETF and the $7 million ARK Innovation ETF. The company manages four exchange-traded funds with $240 million in assets.

GBTC Delivers Results

Chris Burniske, an analyst and the blockchain products lead at ARK Invest, said GBTC has delivered 67 basis points to Next Generation Internet ETF’s return and 62 points to the ARK Innovation ETF since September 2015.

Next Generation ETF experienced a 15.29 percent return in 2015 while the Innovation ETF posted a 3.76 percent gain.

GBTC has been a great diversifier for Kingsbridge Wealth Management, a multi-family firm in Las Vegas, Nev. with $150 million in assets. GBTC has been a great diversifier since it has had a low correlation with other asset classes, said David Dunn, Kingsbridge’s founder and chief investment officer. The firm has invested about $1.7 million in bitcoin and the blockchain.

Featured image from Shutterstock.