It’s been 9 years since the SEC filing was submitted for the Winklevoss Bitcoin Trust, but we still don’t have a Bitcoin ETF in the United States. That is not the case overseas where numerous crypto products are available. This underscores the need and demand for broader access to these products. Hashdex started about 5 years ago with the goal of listing different crypto ETFs all around the world that are investable for sovereign and retail funds. Bruno Sousa, the company’s head of Markets, and Samir Kerbage, its Chief Product & Technology Officer, joined the ETF Think Tank to discuss the future of cryptocurrency investing.
Hashdex has two primary objectives – bringing access to the masses and education. The company is attempting to take a larger approach to crypto investing by focusing not just on Bitcoin, but also ether, defi, the metaverse, and Web3. From there, they add in high quality research to product diversity. Sousa says the company has a strong belief in this sector for the long-term and what it could do for the world.
The initiatives for crypto began in the United States, but the overseas markets have really taken leadership in product development. The conversations around crypto are taking much longer and that has resulted in some of the U.S. companies that could capture share in the space falling behind international firms. Crypto funds already exist in places, such as Europe, Canada, and Australia, but the U.S. is still working on regulatory clarity. The White House is now pushing for a consensus and more clarity realizing that this market is important. Sousa says the U.S. needs to be a leader and thinks we could see a big change in 2023.
With Bitcoin trading at around 70% below its all-time high, the question has arisen about why people should care about investing in it right now? Sousa says that from a functionality standpoint, Bitcoin solved a long-standing problem in tech, which is how can you create a digital asset that is unique and scarce? It’s become the easiest way to send money from one person to another instantaneously, while banks could take days to get the money to its destination. Bitcoin doesn’t need to become the largest currency in the world as long as it becomes a more viable solution for at least some situations. If it can become the 3rd or 4th most popular currency in the world, it can still be successful.
One of the big questions surrounding Bitcoin is what it actually is. Is it a growth asset? A store of value? A technology? Sousa says that it is not really a hedge, but an alternative. It fluctuates too much relative to currencies right now, but the volatility in the pound shows that it may not be that different. It may get to true currency status in the future, but it is still in price discovery mode. Kerbage believes it’s not a matter of if, it’s a matter of when it becomes a transformative technology. It could get to the point of becoming a currency alternative, but it is more of a long-term investment opportunity today.
The biggest thing with crypto right now is that society just needs to get used to it and accept it. Right now, we’re in 1998 of the internet with cryptocurrency. It’s more about acceptance today and it will be a work in progress for a while. For now, it may work better as a strategic allocation for the long-term. A single digit allocation to a broader portfolio could make a big difference.
Other key takeaways:
- Another transformation would be what a spot Bitcoin ETF could bring to the market. Pension funds are already starting to allocate. In Brazil, there is big adoption among family offices. Global central banks are already talking about digital currencies. The U.S. is way behind on this front.
- Gavin Fillmore, COO of Tidal Financial Group, discussed the structure and noted that ‘33 Act ETF fund is far tougher to bring to market, but it has structural advantages for investors. See referenced article form Cinthia Murphy: https://blog.etfthinktank.com/blog/the-40act-vs-33act-etf-battle
- Hashdex is a believer that this is the way to go and will keep fighting for it. This is the vehicle that could someday own spot Bitcoin.
- One big advantage of Bitcoin is that you keep it in cold storage. Someone can steal another person’s gold coin, but you cannot do that with Bitcoin. That is a massive value-add. After we reach the point where Bitcoin is a good store of value, then we can talk about using Bitcoin to buy a cup of coffee. We need to see the masses view it as a currency first.
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