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Hedge Clippings | Friday, 09 April 2021
We're not sure if it's because we're slow on the uptake, old, or ultra conservative, (or all three, along with plenty of other problems to boot) but here at Hedge Clippings HQ we've been trying to get our head around cryptocurrencies for some time. With, we might add, considerable difficulty.
A few years ago we might have been excused for thinking Crypto would always remain in the realm of the dark web, but it turns out we were living in the proverbial dark ages. Crypto is now mainstream, and currently has a market capitalisation of around US$2 trillion in "old money", led by Bitcoin, which at US$1 trillion (and rising) accounts for around half of that total value.
It appears we weren't alone in that old school thinking. Amongst mainstream converts are Morgan Stanley, who not long ago claimed "bitcoin's real value could be zero" before recently becoming "the first big US bank to offer its wealthy clients access to Bitcoin funds".
Or this old headline, "Bitcoin is a fraud that will blow up, says JP Morgan boss", which has now changed to "JP Morgan says investors could make Bitcoin 1% of portfolios". To be fair we're not sure if the "previous" quote was from current JPM CEO Jamie Dimon, who is currently very bullish on the prospects for the US economy over the next two years, with or without Bitcoin.
Not to be outdone in the "poor prediction stakes", Goldman Sachs put out "5 (presumably good) reasons why bitcoin is not an asset class, nor a suitable investment", before reportedly restarting "a cryptocurrency trading desk amid bitcoin boom". Or an ex-CEO of PayPal, who claimed Bitcoin "is useless as a payment mechanism and ridiculous as a store of value" before this headline: "PayPal's entry to crypto followed long build up in expertise" - and which we assume is why he's "ex" and the entry took place under a different CEO.
There are others, infinitely smarter than yours truly, but you get the point. Crypto is now mainstream, and more importantly is likely to become more so. It's even advertised on the side of Sydney's buses, and we presume, now it's safe to travel there again, Melbourne's trams.
But that doesn't help this dinosaur, who has always tried to keep up with technology and financial products with varying degrees of success, getting to understand the what, where and how of the cryptocurrency world. Theoretically Dr Google can help, but the learning curve is steep, and the language akin to learning Swahili in a crowded bar. And diving into learn more is worse than going down a wombat's burrow backwards than a rabbit hole.
For instance most people have heard of Bitcoin, but did you know it seems there are no less than 4,656 different "coins" as well as Bitcoin? Or that there's a thing called a Satoshi, worth 100 millionth of a Bitcoin? (How would George W Bush Jnr. get his head around calculating that?). Or that the folding stuff you might still keep in your wallet or bank account is known as "fiat money"? (me neither). There are literally hundreds of crypto exchanges, and to add to the 4,657 coins, derivatives galore. So you're either in the know and understand the jargon, or like us, playing catch up.
There are no doubt profits galore, and risks aplenty, particularly for the uninitiated, especially as the market is not only complex, but broadly unregulated, which no doubt has traditional exchanges and central banks - plus law enforcement agencies - concerned. And given that environment, many service providers such as prime brokers and fund administrators in Australia are reluctant to be the first to enter the market.
At FundMonitors.com we have probably been slow as well, given our self acknowledged lack of understanding of the sector - which might seem at odds with a service that began life over 15 years ago as an "eyes and ears information service into the alternative assets sector". However, - better late than never - the first "crypto" fund's online application (the Digital Asset Fund) is now available for wholesale investors on OLIVIA123 and the fund will shortly be added to the AFM database. In May we'll be holding an information and education session, both as an online webinar and a live event to try to answer all the questions you ever wanted to ask about Crypto, but didn't know where to start.
To pre-register, please contact us.
And on that note have a great week-end. We're off to that bar to learn Swahili.
News & Insights
New Funds on Fundmonitors.com
Video interview with Martin Pretty from Equitable Investors
The 4 Bubbly Pockets of markets showing heightened risk for investors by Ophir Asset Management
Making up the numbers by Evans & Partners
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