ETF investors see explosion in investment in cryptocurrency with Coinbase listing

Coinbase’s pending direct listing, scheduled for Wednesday on the Nasdaq under the symbol COIN, is a broad base of the investment community outside of the usual crowd of cryptocurrencies.

“Coinbase is going to blow people’s minds,” said Matt Hougan, chief investment officer at Bitwise Asset Management, which pioneered the first cryptocurrency index fund. “I think it will force traditional finance to struggle with the phenomenal growth that is taking place in cryptography.”

It is not difficult to understand why. Coinbase is probably the main beneficiary of the reactivation of the cryptocurrency. It had 56 million verified users, with revenue of $ 1.8 billion in the first quarter alone and a value that could range from $ 50 billion to $ 100 billion.

This is an extraordinary valuation for an exchange of any kind. By contrast, the Intercontinental Exchange, which runs the New York Stock Exchange, has a market capitalization of $ 65 billion, while the Nasdaq has a market capitalization of $ 25 billion.

This type of valuation is making the investment community (and particularly stock market fund investors) very excited.

Cryptographic assets have had the same problem that other hot commodities (such as pot or space) have had in the past: a high degree of interest with a noticeable lack of invertible assets. Coinbase, however, will go a long way toward solving this problem.

“Coinbase will be the largest public cryptocurrency company in the game, with an end point,” said Matt Kennedy, chief market strategist for the capital’s Renaissance Stock Exchange, which runs the ETF’s (Door Exchange). capital of the Renaissance. “I hope every cryptocurrency ETF will want (or need) to own it at some point, and our ETF may be the first to own it.”

It’s the same story with Amplify’s Christian Magoon, who runs the Transformational Data Sharing (BLOK) ETF, which focuses on blockchain technology.

“We are actively managed and can buy it the moment it goes public and we fully expect it to be in our portfolio,” Magoon told me.

Other technology ETFs, especially Cathie Wood’s ARK Fintech Innovation (ARKF) ETF, as well as the Global X FinTech (FINX) ETF, are likely to be buyers, and that’s just the beginning. “You will see many more ETF companies applying for cryptocurrency funds,” Magoon said.

As the ownership of cryptocurrencies by individuals and institutions is still quite low, many believe that Coinbase’s valuation will encourage more private entities to go public.

“I think we’re going to see a gold rush for cryptocurrencies as investors realize how quickly companies are‘ picking and shoveling ’the cryptographic ecosystem,” Hougan said.

Michelle Bond, a former senior attorney for the SEC who is now CEO of the Association for Digital Asset Markets, an association of digital market firms, said the Coinbase list “will break down the main barriers because it will have to to be approved by a traditional financial regulator, which guarantees transparency, integrity and disclosure “.

Of course, that means more players will come, including high-profile competitors. For example, Bakkt Holdings, a digital asset market owned by Intercontinental Exchange, has entered into an agreement to combine it with a SPAC, VPC Impact Acquisition Holdings.

Although bitcoin ETFs exist in the United States, they are not direct owners of bitcoins. They own stock portfolios that are considered to have exposure to blockchain technology.

A bitcoin-owned bitcoins ETF is a dream expected by investors in cryptography because it will greatly expand the class of potential owners.

“A bitcoin ETF will provide an easy, simple and efficient way to have Bitcoin,” said Som Seif, who runs the Purpose Bitcoin ETF, which is listed in Canada. “Like gold, the storage and custody of Bitcoin is unique. An ETF solves this problem. It is also like a seal of approval: there is institutional support. The GLD [Gold ETF] it changed the world when it came out in 2004. It facilitated the use of gold as an asset class. ”

Predict that a bitcoin ETF will do the same with Bitcoin.

Several weeks ago, the SEC acknowledged receipt of Van Eck’s bitcoin ETF application, which initiated a 45-day regulatory review period. At the end of this period, the SEC must approve, deny, or extend the review period. Several other companies, including Fidelity, have also applied for a bitcoin ETF.

Most observers believe the SEC will score and try to extend the review period. The maximum term is 240 days.

“The commission doesn’t like to do new things and when there’s something within that category, it gives you agitation, so the attitude is‘ we take the most time, ’” an SEC observer said. who spoke for a long time. condition of anonymity, works in a sensitive job in the cryptographic industry.

Still, most bitcoin observers believe that the end of 2021 could finally be the year a bitcoin ETF is approved.

“The biggest potential change is [SEC Chair nominee] Gary Gensler, “Magoon said, noting that Gensler has taught cryptocurrencies and seems more receptive to the presentation of bitcoins. He also noted that SEC Commissioner Hester Peirce, a Republican, has also been a supporter of a bitcoin ETF.

The biggest difference, however, may be the improved security of the bitcoin universe.

The SEC, in a 3-1 decision in 2018, rejected for the second time a request from the Winklevoss brothers for a bitcoin ETF. The SEC specifically said it was concerned about extreme price volatility and cryptocurrency fraud. It was also noted that 75% of bitcoin trading takes place abroad in unregulated exchanges that could be manipulated.

All bitcoin observers agree that the SEC should be satisfied that fraud and manipulation issues have been resolved.

Hougan believes the crypto market has come a long way in addressing these concerns.

“A few years ago there was no regulated futures market, there are now, and the volumes are much bigger,” Hougan said. “There were no insurance-regulated guardians either, now yes. We’ve come a long way, it’s not clear if we’ve crossed the target line, but we’re getting closer.”

Matt Hougan, chief investment officer of Bitwise Asset Management, and Christian Magoon, who heads the Amplify Transformational Data Sharing (BLOK) ETF, an active management portfolio focused on blockchain technology, will be our guests at CNBC. “ETF Edge“at 1 pm ET Monday and onwards”Half report“at 12:35 p.m.