By Ryan Dinse – Money Morning.
Rich investors are going nuts for crypto.
That’s if the number of new crypto hedge funds opening up is anything to go by…
There are more dedicated cryptocurrency hedge funds out there than ever before. And even more are due to start later this year.
Fintech analytics firm Autonomous NEXT, just released a complete list of 55 cryptocurrency hedge funds. Interest in the space is growing. ‘Like wild mushrooms, crypto hedge funds have been taking root in the volatile and unregulated soil of the crypto economy,’ Autonomous NEXT said on their website.
Even previous bitcoin sceptics like US ‘Shark Tank’ star and tech billionaire, Mark Cuban are starting to invest in crypto-focussed funds. He just backed a new Initial Coin Offering (ICO) called 1confirmation.
So what changed his mind?
‘High risk. High reward,’ is how he described his thinking.
And he’s not the only one that’s changed his tune pretty quickly…
‘They are coming in, in very significant numbers.’ Emma Channing of Argon Group Investment Bank said, ‘I think it’s a fantastic sign of the maturing market. A sign that ICOs, as an asset class, are here to stay.’
This industry push isn’t limited to American and European investors.
Roberto Ponce Romay, the former Bain senior manager who recently founded Crypto Assets Fund in Latin America, said that investors in countries like Colombia, Peru and Mexico are also taking note of cryptocurrency opportunities.
‘I will say it’s growing, but especially in Argentina, because they had a problem in the past when it was hard to take out US dollars,’ Romay said. ‘They are looking at cryptocurrency more because they want to make an investment, to protect their wealth. It’s booming.’
The big end of town is clearly starting to jump aboard the crypto train. That’s all well and good for the rich list, but what about the average superannuation fund?
Well, in a way they could be part of this revolution soon, whether they want to or not! I’ll explain what I mean shortly.
Crypto investing pioneers
First let’s look at a few retirement funds that are investing directly in crypto. As you’d expect, the first regulated funds are coming out of the US.
BitcoinIRA is a California based company that allows users to create compliant retirement funds to invest directly in the major cryptocurrencies. Chris Kline, COO of BitcoinIRA said that customer demand for the currency has been ‘immense’.
Closer to home I couldn’t find any superannuation funds investing directly in cryptos right now. But a host of services have recently opened up to allow SMSF trustees to invest in Bitcoin in a compliant way.
One is bitcointrader.org and they offer services to ‘buy, comply, store, secure and insure’ for SMSFs interested in a crypto punt.
A quick word of warning. The cryptocurrency market is unregulated in Australia, so do your own due diligence and tread very, very carefully.
One potential super fund in the cryptocurrency industry is Australia’s Future Fund. The Future Fund is the federal government’s super fund for their employees.
It’s had a cracking year of returns according to reports out last week. And although it holds a wide portion of its asset in cash (20.3%) it also has a fair amount (11.5%) held in private equity investments.
It’s list of private equity investment managers totals around 33. And includes seed stage Snapchat investor Lightspeed ventures. So it wouldn’t surprise me to see a cryptocurrency play or two somewhere in the investment mix. Indirectly at least.
Though, of course I can’t say for sure.
But there’s one avenue that all super funds use. And a soon to be announced change could make every superannuation fund a participant in the blockchain revolution.
Blockchain coming to an exchange near you
The operator of the Australian Securities Exchange (ASX) will complete an assessment of blockchain-style distributed ledger technology (DLT) as a replacement for its CHESS system by the end of the year.
The technology has ‘potential for significant operational efficiency and new service offerings for the entire industry’ said ASX CEO Dominic Stevens.
‘The more we investigate the more we see potential for the technology across a wide range of applications,’ he added. ‘Can we go to the next level with DLT? At the moment that looks very promising.’
No details were given on the specifics of how this might work. But it does signal an increased acceptance of the underlying technology. And if this is the way the ASX proceeds, then every superannuation fund will be taking part in the blockchain revolution through the act of buying and selling shares.
You get the feeling that cryptocurrencies are poised for a breakout year this year into mainstream acceptance.
It might only be a matter of time before you start to see ‘Crypto assets’ next to ‘Australian shares’ as part of your super portfolio mix.