Bitcoin, Cryptocurrency ETF Approval Is The Classic ‘Chicken or the Egg’ Scenario
There's always been a residual level of buzz generated around the goings on of the cryptocurrency world. Nowhere else is this true than with Bitcoin, more recently, however, the element generating the most buzz has been the recent proposals for the development of a Bitcoin Exchange Traded Fund (ETF).
From the moment it entered the realm of discussion, financial experts have been giving their opinions on the prospect of an ETF, one of the latest was the Co-Founder and CEO of Crescent Crypto Asset Management, Ali Hassan, who believes that an ETF may be coming sooner than some expected, but not as fast as the more optimistic would like.
Predicting that an ETF will arrive on the market within 18 months, Hassan is taking a longer-term perspective on the subject of cryptocurrency. But with that, he sees Bitcoin as just the start, believing that multi-coin ETFs may be on the horizon too:
“What’s really interesting is these multi-coin products, and I think that’s what’s going to transition the ecosystem from just access into looking at this as a different asset class.”
The SEC, which will be the organization considering the development of these ETF has yet to make a conclusive decision on any such applications as of yet. Crescent has the longer-term aspiration of offering items on these exchanges, which whips up a considerable problem in the mind of Hassan:
“It’s a chicken and egg problem. The SEC wants to see investor protection, in specific for retail investors and what the community is saying is passive vehicles will actually increase the participation in the market and reduce some of those concerns. We do think that a product is coming soon,”
“There are some very interesting products on the market right now. The VanEck product is something that we’d like to look out for. Those are all single coin products though.”
During the interview Hassan attended with Bloomberg, he reiterated the aims of the Crescent flagship fund, stating that it wanted to take a more passive approach towards to trading in line with the behavior of users in the US:
“Our investors have been happy, we have not had a single redemption and we’re excited to say that we’re seeing tremendous demand both internationally and in the US. The elephant in the room is that US investors like passive investments, it’s a really good way to get exposure without manager bias. It’s a lot cheaper and a lot more efficient tax-wise and fee-wise. Demand is there and we’re playing in that demand.”
Being one of the youngest markets introduced to the world, Cryptocurrencies have always been exceptionally volatile. To counteract this, Crescent introduced contingency plans for any of the fluctuations that would take place in the market.
How does Crescent manage to do this? By holding over 20 separate types of coins, meaning that the fund is able to overcome any level of market volatility as a result. Each of these coins would have a different level of market correlation while taking into consideration the 90-day trailing average market capitalization.
It's this factor, Hassan believes, would ‘mute the volatility' of the market.
“We hold 20 coins. When you hold 1 Bitcoin or a part of a Bitcoin, you’re opening yourself up to the idiosyncratic risk of one asset. By holding 20, the portfolio behaves in a way that’s significantly less volatile. We hold all our coins in cold storage, we do not open ourselves up to exchange risk. We would not risk our client’s assets by leaving them on an exchange.”
Crescent currently holds a very diverse flagship portfolio, consisting of over $50 million in various assets. It currently gives a major level of importance to Bitcoin (44.7% split in portfolio), but the portfolio also includes coins like Ethereum (19.3%), XRP (8.7%), Bitcoin Cash (6.1%) and EOS at 3.4%.
While demonstrating a priority towards major cryptos, the fund includes a wide-ranging population of smaller alt-coins, Hassan argues.
“What our fund does is capture the value of the overall cryptocurrency blockchain asset class. We’ve positioned the fund in a way that it’s a long-only, unleveraged asset that solves a complexity free access vehicle for retail and institutional investors.”
When asked about the future value of Bitcoin, Hassan had sky-high optimism for its future.
“[It’s going] to the moon. We’re expecting it to go much higher. We think that there’s orders of magnitude to go and owning it in a passive vehicle like ours is a really good way to participate.”