Fortune: What is the next step for savvy investors in the crypto industry to invest?


Not long ago, cryptocurrency investment could (and often) be regarded as a “niche”. In the summer of 2016, the total value of all cryptocurrencies in the world was less than 10 billion U.S. dollars, and in the popular imagination, this technology is connected with online drug transactions and does not care about the venture capital transactions in it. Today, this industry is a different world. Anyone can use Robinhood account to buy cryptocurrency; S&P 500 companies hold digital currencies on their balance sheets; Bitcoin reached $30,000, which was a bull market fantasy a year ago, and it’s now counted as a serious one. Retracement. (At the same time, the total value of the cryptocurrency market hovered around $1.5 trillion in late July.)

The current state of cryptocurrency reflects more than just the upsurge in trading the tokens themselves. The cryptocurrency and blockchain industries are maturing into a composite industry, and this evolution provides investors with new ways to even more firmly embed the broader financial world in transactions. Katie Haun, general partner of Andreessen Horowitz, said: “There is now a mainstream understanding that cryptocurrency is more like an architecture and operating system, and various products and services can be built on the cryptocurrency system.” She co-leads this company The cryptocurrency investment platform of a well-known venture capital company.

For investment experts, this product and service represents the next frontier. As of mid-June in 20201, venture capital companies have invested an unprecedented $17 billion in the cryptocurrency field, and they are diversifying the types of blockchain-related investments they make.

A16z recently raised $2.2 billion for a new cryptocurrency fund, which is its third and largest fund to date. Haun pointed out that the non-fungible tokens (NFTs) market is one of her focuses. NFTs allow creators to turn digital content into collectible and tradable commodities, ranging from artwork to sports highlights to video game avatars. A16z’s recent NFT investments include leading the latest round of financing of $100 million in the NFT market OpenSea, which is valued at $1.5 billion, and also invested in Virtually Human Studio, which operates a virtual game that allows users to buy and sell And breeding NFT “horse racing”.

Crypto-conscious investors believe that the NFT trend is an opportunity to become an early promoter of a potentially hugely influential business, just like the art market, but more democratic and possibly larger. “Craig Russo, Innovation Director of Polyient, a digital asset investment company, said: “Anyone who missed the expansion and growth of Instagram [and similar platforms] 10 years ago saw NFT as a new area they could invest in.

Venture investors are also pouring assets into decentralized finance (DeFi), a term that covers an ever-expanding blockchain lending, borrowing, investment, and insurance options market. “It will transform finance as extensively as the Internet transforms information,” said Joey Krug, co-chief investment officer of Pantera Capital, a venture capital firm focused on cryptocurrencies. “Every component of the traditional financial system is being copied.” Pantera recently invested in a seed round of Risk Harbor, a startup company that provides insurance for DeFi projects.

Venture capital firms also pointed to encouraging trends among their institutional clients and limited partners. Unlike the downturn in the cryptocurrency market in 2018, the bear market drove many supporters away from the cryptocurrency market. The sharp adjustment in cryptocurrency prices this year has not weakened investor confidence. “I don’t think we will enter a bear market that will last for several years,” Krug said. “There is so much capital coming in.”

Haun felt the same way. He pointed out that large investors have gotten rid of the perception of cryptocurrency as a “moon experiment.”

Krug added: “They have seen that this experiment is effective.” “Now these institutions believe that cryptocurrency will not disappear, which is a necessity.”


While some investors support innovative private companies, other investors focus on the public market, aiming to make cryptocurrencies more widely used. In this effort, many people will pin their hopes on cryptocurrency exchange-traded funds or ETFs.

The current form of cryptocurrency trading usually involves specialized exchanges, where investors are often troubled by technical troubles and high transaction fees. Proponents of cryptocurrency ETFs hope to provide Bitcoin (and eventually other tokens) through low-cost funds traded on the stock market. They operate much like existing ETFs backed by commodities such as gold and silver. They track the value of related assets by owning the assets themselves or having futures contracts linked to them.

“In the eyes of these institutional investors, cryptocurrency will not disappear. This is an established fact.” Haun, general partner of a16z

Investment management companies have submitted more than a dozen applications to the US Securities and Exchange Commission, seeking to launch cryptocurrency ETFs. Applicants include SkyBridge Capital, a hedge fund of Anthony Scaramucci, and ARK Invest, an investment company led by Cathie Wood, one of the most powerful cryptocurrency evangelists on Wall Street. So far, the US Securities and Exchange Commission has been procrastinating, delaying its rulings on pending applications and keeping silent on any guidance. The US Securities and Exchange Commission has been delaying certain applications for several years.

Ashley Ebersole, a former U.S. Securities and Exchange Commission lawyer and partner at the law firm Bryan Cave Leighton Paisner, believes that securities regulators are reluctant to approve crypto-token-based ETFs because decentralized assets still operate in vague legal areas. “This is a very different product from a stock ETF. All the assets bundled in a stock ETF are themselves traded on the New York Stock Exchange,” Ebersole said. “Encrypted ETFs are a market without regulators, and there is no control that the US Securities and Exchange Commission believes it should have.”

But regulators in Washington can now find an example of a regulated open market cryptocurrency ETF in Canada. This year, Canadian securities regulators approved several such ETFs, including funds that track Bitcoin and Ether, to be publicly traded on Canadian stock exchanges. Among the investment companies that received the green light, Ninepoint Partners in Toronto is one of them. Alex Tapscott, general manager of Ninepoint Digital Assets Group, pointed out that despite the decline in cryptocurrency prices this spring, Canadian cryptocurrency ETFs “have been trading in a completely normal and completely reasonable manner”, tracking related assets, and showing no indication of being manipulated by the market. sign. “This should give regulators in the United States and elsewhere confidence,” Tapscott believes.

At present, investors seeking to directly own cryptocurrencies through open market tools are largely restricted to closed-end cryptocurrency funds. These funds usually operate under stricter trading rules than ETFs and charge higher fees (some funds are about 2% per year, while most ETFs are 1%). They are also usually restricted to a more limited group of investors (accredited high-net-worth investors obtain first-hand information through private equity). These funds include Grayscale Bitcoin Trust (GBTC), which is operated by the cryptocurrency investment company Grayscale and manages nearly $25 billion in assets.

Even Grayscale has commented on its intention to convert GBTC and other cryptocurrency-backed funds into ETFs, partly because it believes this is an option that mainstream retail and institutional investors desire. “Grayscale CEO Michael Sonnenshein said: “There is a group of people in the investment world who are actually waiting for the Bitcoin ETF to be listed before they will begin to allocate assets to this asset class. “

In the absence of U.S. cryptocurrency ETFs, stock market investors have other ways to obtain investment in cryptocurrencies and blockchains. Amplify Transformational Data Sharing ETF (stock code: BLOK) is one of several “blockchain ETFs” that track listed companies in this field. Amplify was launched in January 2018, and its portfolio includes financial technology companies that are experimenting with cryptocurrency payments, such as PayPal and Square; cryptocurrency exchange Coinbase, which went public in April; and lesser-known cryptocurrencies such as Marathon Digital Holdings. Currency mining company. The fund manages approximately $1.1 billion in funds, and in the three and a half years since its establishment, the total return has exceeded 150%.

In an industry based on financial innovation, there are always people trying to create a better mousetrap tool. Makara is a division of the cryptocurrency hedge fund Strix Leviathan and claims to be the first cryptocurrency robot investment advisor company registered with the US Securities and Exchange Commission. Makara’s platform was launched through a soft start in June, allowing investors to inject funds into a variety of diversified token baskets. The minimum investment is only $50, which aims to welcome more retail investors to join. In practice, these investors ultimately buy a fraction of the tokens, just as small investors in public equity ETFs own a fraction of technology company stocks, and these stocks are priced at several thousand per share. Dollar. “Makara co-founder and CEO Jesse Proudman said: “It has been difficult for ordinary people to participate in the entire history of the cryptocurrency asset class. “With the development of this industry, this difficulty will inevitably decrease. 


Cryptocurrency for more people

Investors betting on these trends may make it easier for more investors to invest in cryptocurrency and blockchain technology, so in theory, these markets will become larger.

Bitcoin ETF

ETFs allow investors to invest in Bitcoin and other currencies without the fees and technical troubles of directly owning these currencies. Well-known investment companies like Cathie Wood’s ARK Investment Company are eager to provide ETFs, but the US Securities and Exchange Commission has not yet granted them.


Non-homogeneous tokens help turn digital content such as sports highlights and video clips into owned and tradable commodities. Cryptocurrency bulls see it as the foundation of a multi-billion dollar collectibles market.

Blockchain stocks

While regulators are still solving the issue of cryptocurrency trading, some financial companies have established ETF portfolios around listed financial and technology companies that focus on or set foot in the promotion of cryptocurrency trading, including PayPal, Square and Coinbase.

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