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.”

Binance Raises Eyebrows After Confirming Coinmarketcap Acquisition

Binance Holdings Ltd., the firm behind leading cryptocurrency exchange Binance, has confirmed the acquisition of cryptoasset tracking platform CoinMarketCap.

In a blog post, Binance confirmed the acquisition and claimed CoinMaketCap “stays committed” to providing quality cryptocurrency data to its users “while benefiting from Binance’s expertise, resources and scale.” It added CoinMarketCap has “maintained independence from external stakeholders since its inception” and will keep being an independent business entity.

In the post, Binance CEO Changpeng Zhao was quoted as saying CoinMarketCap is the “landing page of crypto.” The acquisition was first reported on by TheBlock, which wrote the platform could be changing hands for as much as $400 million in cash and stock.

While Binance’s BNB token and the Binance exchange are listed on the platform, the post responded to users’ concerns surrounding the acquisition writing:

CoinMarketCap and Binance are separate entities that maintain a strict policy of independence from one another: Binance has no bearing on CoinMarketCap rankings, while CoinMarketCap has no influence over Binance’s operations.

As CryptoGlobe reported, users expressed concern surrounding CoinMarketCap’s data after the acquisition was first reported, as managing the platform could be very beneficial for Binance, which could use it as a funnel to gain new users.

Speaking to Bloomberg News Nic Carter, co-founder of Coin Metrics, noted that Binance could also set its platform as the preferred exchange by topping the rankings by default.  Carter added:

While the move may cause some to question CMC’s [CoinMarketCap’s] ability to remain a neutral data provider, it could potentially be very productive for Binance.

Binance’s blog post details CoinMarketCap’s founder Brandon Chez is stepping down as CEO to focus on his family, while current Chief Strategy Officer Carylyne Chain has been named interim CEO.

The cryptocurrency exchange recently raised users’ ire after participating in what was dubbed a hostile takeover of the STEEM blockchain, later on removing the vote. CoinMarketCap’s data itself has also been heavily criticized, with one filing with the Securities and Exchange Commission from Bitwise Asset Management arguing 95% of the trading volume it reports is fake or non-economical in nature.

Cryptocurrency exchanges have been known to use schemes that help boost their trading volumes – in some cases allegedly going as far as wash trading – to boost their rankings on CoinMarketCap and gain visibility.

Addressing the issue Zhao noted it wasn’t an easy problem to fix, adding that almost everything “requires some kind of judgement or algorithm.” While the acquisition comes at a time in which the economy has been suffering because of the COVID-19 outbreak.

Market volatility has, however, been good for crypto exchanges. Zhao revealed Binance’s traffic increased about five times over the past few weeks, while Coinbase had already revealed its volumes grew after the March 12-13 market crash.

Featured image by David McBee from Pexels