Posted 8 months ago | by Ben Armstrong
Crypto Funds Enter the Market – More Options are Sure to Come
There aren't many crypto funds in the marketplace, but that is probably going to change as decentralized currency becomes even more popular. Many people don't know there are more tokens than Bitcoin, let alone how to buy and invest in all the cryptos that are out there.
Bitcoin Capital is one of the newest entrants into the crypto fund arena – and it has floated a share-based fund that trades on a Swiss stock exchange. Like many products out there, it is actively traded, and hopes to beat holding a 'cash' position in major cryptos.
There aren't many other funds out there in terms of a competitor, especially when it comes to actively managed funds. In reality, there is probably a lot of room for many different crypto funds with many a multitude of investment strategies.
Crypto Funds May be The Next Hot Mainstream Investment
From the time that Modern Portfolio Theory was born, it took decades for mutual funds to hit the scene. There probably won't be that kind of lag time in the crypto fund market – but it is interesting that there aren't more retail products available.
There is, of course, a clear incentive for the the world's largest economies to block a massive flow of their dogs#$^ fiat currencies into the crypto market where they will make decentralized tokens look like the most amazing investment in the history of human kind.
The central banks are to blame for this situation – as they have created money with reckless abandon, and now need to control what assets it flows into on both a retail and institutional basis.
We are describing central planning, which only delays the inevitable. Switzerland has taken the lead in allowing crypto funds to be traded like so many other investment funds, and allowing anyone who can play in Swiss markets to protect themselves from a global collapse in the post WW2 monetary order.
Financial Innovation With Cryptos is Limitless
The decentralized assets that have grown up in the wake of Bitcoin are built for funds. There are a range of options for how they can be held – from direct custody agreements to smart contracts that could be used to create investment funds that require minimal human involvement.
Given the way that institutional investment is seen today, funds that hold a range of assets on a direct basis are likely to be popular, as institutional investors are required to invest in funds that have a strong chain-of-custody that protects the investors in case of a liquidation.
On the other hand, there may be an emerging investment market for assets that allow funds to hold assets at arms' length, given the ongoing issues with the global political situation. Some large investors may want to have some level of deniability due the the fact that ex-post facto laws are becoming more common.
New Metrics Are Needed
One question that remains relevant is how cryptos should be measured – especially when it comes to fund performance. Until now, major currencies like the US dollar have been used, but this isn't really fair.
Bitcoin has SMASHED the USD since its inception – even at recent cycle lows of $3,000, BTC makes any fiat currency look pathetic. When compared to a problematic currency, like the Argentine Peso or Turkish Lira, the case for holding a major crypto is even more compelling.
The simple fact is that cryptos offer an apolitical solution to a global currency problem that is likely to grow far worse before there is any sort of total collapse (and new view on how money should be created).
In the meantime, anyone who invests in cryptos should be careful to maintain their objectivity in the face of wild market swings – and eye-watering price appreciation when measured in fiat currency terms.
Fiat is on its way out – when we look at cryptos, we need to remember that worthless currency will likely reach its intrinsic value – sooner rather than later.