Although the fund has no investors as yet, it was incorporated earlier this year and will be named Wise Origin Bitcoin Index Fund I LP. Peter Jubber, Fidelity’s president and director of digital funds, will run it.
The fund will be open to investors who pony up a minimum investment of $100,000, which puts the fund in the reach of a select few — generally institutional and accredited investors.
Accredited investors can be a range of entities — typically high-net-worth individuals, banks and even insurance companies. They’re individuals or entities allowed to trade in securities that might not be registered with regulators or other authorities (although the SEC is looking to ease those rules).
Theoretically, these are investors who don’t need the financial protections that are typically extended to less-savvy investors. In other words: You pays you money, you takes your chances.
That’s pretty fitting for bitcoin, which has had a rocky time of it over the years.
First of all, there’s the price volatility. It seems long ago and far away, but bitcoin debuted some 11 years ago, trading at the time for just a few pennies. But since then, the digital currency has traded as high as $19,783 but dropped below $4,000 earlier this year. And at its recent $11,200 level, the marquee name of cryptocurrencies has surged more than 58 percent so far this year.
Those gains are seemingly enough to make some investing giants sit up, take notice and craft vehicles that will give wealthy investors (and presumably relatively sophisticated ones) a way to trade bitcoin.
Fidelity Digital Assets said that a survey of 800 U.S. and European institutional investors found that 36 percent are already invested in digital assets. Roughly six in 10 respondents also stated that they believe digital assets have a place in their portfolios.
Some 80 percent said there’s “something appealing” about being invested in those assets, including the fact that digital currencies are uncorrelated to other asset classes. Many also found appeal in the fact that certain digital assets are free from government intervention.
Additionally, the survey found that bitcoin is the “digital asset of choice.” However, there’s still some reticence to invest in digital currencies due to the price volatility (cited by 53 percent of respondents) and the potential for market manipulation (47 percent).
We note that there remains a “Wild West” component to cryptocurrency trading (OK, speculation). In fact, South Korean police this week seized Coinbit, the country’s third-largest cryptocurrency exchange. Authorities alleged that 99 percent of the exchange’s trading volume was faked through wash trades, a form of market manipulation.
And earlier this month, the U.S. Department of Justice said it disrupted three online funding campaigns that used cryptos to fund terrorist activities via 300 crypto accounts, four websites and a series of Facebook pages.
In the end, knowing what you own and why are key tenets of investing. That’s hard to do with crypto — even bitcoin — due to the fact that regulators are still puzzling out how to classify the assets. Plus, crypto exchanges are largely unregulated.
But give accredited investors credit where its due when it comes to shouldering risk and hoping for reward.