Many are still waiting for the entry of institutional investors in order to regain the massive loss of Bitcoin in 2018. There are many attempts to attract these institutional investors. And recently, Morgan Creek Digital and Bitwise Asset Management decided to join forces and introduce the Digital Asset Index Fund. This is aimed to allow institutional investors to have an exposure towards a broad basket of cryptocurrencies.
Attracting Institutional Investors
Mark Yusko who works as Morgan Creek Capital Management’s Chief Investment Officer mentioned that endowment, pension funds, and family offices are looking to invest in this area. The minimum investment for this particular fund is $50,000. It is going to track a new index called the Morgan Creek Bitwise Digital Asset Index (MBDAI). What it does is allow investors to access different types of cryptocurrencies.
Earlier this year, Grayscale rolled out the Digital Large Cap Fund, which is another attempt to attract institutional investors. On their website, it says that the funds allow investors to go after cryptocurrencies “without the challenges of buying, storing, and safekeeping digital assets”. Yusko mentioned that this is a “more rational way to evaluate cryptocurrencies”.
Security is a Primary Concern
A primary concern among crypto investors is security and safety of their cryptocurrencies. Many are concerned mainly because of the hacking incidences attacking both investors and crypto exchanges. As for Morgan Creek, they mentioned that they are using cold storage wherein the cryptocurrency is stored offline using a third-party custody. Yusko mentioned, “We want to be the trusted advisor in the digital world”.
Strict eligibility is followed by the fund. Of course, there are more than a thousand cryptocurrencies out there. As for this particular fund, the cryptocurrencies included are Bitcoin, Bitcoin Cash, Ethereum, EOS, and Litecoin. The qualifying assets shouldn’t have 90% of their 30-day trading volumes in just one crypto exchange. Also, coins that are known for “security vulnerabilities” and “undue exposure to 51% attacks” should be included.
The likes of XRP and Stellar are among the ones that are absent in this index. XRP is the third largest cryptocurrency based on market cap with a value nearing $14 billion. The primary reason why XRP has been excluded is the fact that Ripple controls more than half of the total XRP supply.
This isn’t exactly a surprising move to exclude XRP from the fund. Ripple is dealing with different lawsuits. The US Securities and Exchange Commission declared Ethereum and Bitcoin as commodities. Unfortunately, this wasn’t the case with Ripple. Instead, there are claims that XRP is a security.
This move could mean that there really is a demand coming from institutional investors to participate in the crypto market. In fact, you even have Microsoft, Starbucks, and ICE teaming up with the same intention to attract institutional investors.
With regulatory changes happening today, not to mention funds created to attract big-time players, there is a chance that we could actually see a bull-run by the end of the year.
Tom Lee of Fundstrat is quite confident that Bitcoin is heading above $20,000 this year. Recently, Bitcoin was able to cross $7,000 again.