Coinbase, Major Investment Firm Team up to Launch $500 Million Crypto Fund

Francisco Memoria
  • Coinbase and Wilshire Phoenix have recently teamed up to launch a fund capped at $500 million.
  • The fund is set to use a "novel approach" to help clients gain exposure in the crypto ecosystem.

Coinbase Custody, a unit of San Francisco-based cryptocurrency exchange Coinbase, has recently teamed up with New York-based investment firm Wilshire Phoenix to launch a cryptocurrency fund capped at $500 million.

According to a recently published press release, Wilshire Phoenix expects the fund to be launched later this year, to provide its clients exposure to bitcoin through a “novel approach” that’s reportedly set to mitigate “some of the risks” associated with the flagship cryptocurrency’s volatility.

Per the release, the investment fund “may” make it easier for financial institutions and investors to gain exposure to the cryptocurrency ecosystem. It won’t, however, “simply hold bitcoin.”

Per the document, investors and financial institutions may find it hard to buy and hold cryptocurrencies as under America’s Generally Accepted Accounting Principles (GAAP), their pricing models imply specific challenges. The investment firm believes its patent-pending system will provide a solution.

To limit counterparty exposure and “unnecessary additional fees” normally associated with investment funds, the firm will also not use derivatives or “any form of leverage” to help clients gain exposure to bitcoin, the press release states.

Bill Hermann, the founder and CEO of Wilshire Phoenix, stated that Coinbase Custody provides the firm a best in class platform on which to securely store digital assets.” The document adds:

While the fund is not intended to replicate a direct investment in Bitcoin. It will seek to provide investors and financial institutions with the ability to gain exposure to Bitcoin while mitigating some of the risks involved from sudden price movements of Bitcoin.

Sam McIngvale, general manager of Coinbase Custody Trust, added the San Francisco-based company is not only offering Wilshire Phoenix clients’ secure storage for their cryptocurrencies, but also the “ability to perform GAAP-compliant audits whenever the need arises.”

Coinbase, as CryptoGlobe covered, expects to wrap up this year with profits of over $455 million, up from $380 million last year, when most cryptocurrencies surged to new all-time highs. Last year, at one point, it was adding 50,000 users a day, its CEO Brian Armstrong revealed.

Recently, the host of CNBC’s “Crypto Trader” show Ran NeuNer stated Coinbase set planning for an initial public offering (IPO). Asiff Hirji, the firm’s chief operating officer (COO), recently revealed it isn’t planning to raise funds via an IPO “any time soon.”

Grayscale Digital Asset Manager Sees 84% of Inflows From Institutions

Neil Dennis

Grayscale, the digital assets fund manager, revealed its strongest quarterly inflows in a year during the second three months of 2019, as 84% of investments in the period came from institutions.

The company, with manages its flagship Grayscale Bitcoin Trust, said across all its investment products it raised $84.4 million - a near 100% increase in quarter-on-quarter product inflows - with the majority - 84% - coming institutional investors, dominated by hedge funds.

The company said in its quarterly report:

This quarter, institutional investors comprised the highest percentage of total demand for Grayscale products since we began publishing this report in July 2018.

Bitcoin Trust Leads the Way

Primary among these, as the price of bitcoin rallied to 18-month highs during the quarter, was the flagship Bitcoin Trust fund, with average weekly investment into the vehicle hitting $4.1 million. Grayscale praised all of its investment products, which all made positive quarterly contributions for the first time. The report said: 

The digital asset market rebound gained momentum in the second quarter as all ten investment vehicles in the Grayscale family of products generated positive performance net of fees.

Total assets under management at Grayscale nearly tripled from $926 million to $2.7 billion thanks to the digital asset market resurgence. The company added:

This growth demonstrates that the recent rally in digital asset prices is supported by fresh investment.

Growth in Altcoin Products

Grayscale also noted "early signs" that an altcoin investment cycle could be starting as these products accounted for 24% of fresh capital, led by inflows into its Ethereum Trust - $14 million - and Ethereum Classic Trust - $5.5 million.

The company said:

While most of the capital invested into Grayscale Ethereum Trust came in June, Grayscale Ethereum Classic Trust saw twelve consecutive weeks of new inflows through the end of the quarter.