With institutions now firmly in on the game, crypto is entering a new era. This is great news for retail investors, as many of funds, derivatives, and other financial instruments are also open to individuals now.
Over the last couple of weeks, numerous reports have emerged that Netflix is working on a new documentary about cryptocurrencies, as a follow-up to its 2016 film “Banking on Bitcoin.” It’s probably well overdue. Given how far the crypto space has come over recent years, the themes of Banking on Bitcoin seem somewhat antiquated these days. It covers the origins of the cypherpunk movement, the Mt. Gox hack, and the takedown of Ross Ulbricht, among others.
While these themes were perhaps relevant in 2014-2016, fast forward to 2019 and the crypto space has long departed from the Banking on Bitcoin “techno-pirate” story. JPMorgan and Facebook are both working on their own versions of a cryptocurrency. In Switzerland, the Swiss SIX stock exchange will soon launch its own digital asset offering.
Furthermore, institutional money is pouring in, driving the price of Bitcoin up to highs not seen since 2017.
The reason for this influx of institutional cash is that there are now many different routes into cryptocurrency. Back in the days when the Banking on Bitcoin crew was filming, the only option for crypto investors was to entrust an exchange. Post-Mt. Gox that involved a huge leap of faith.
These days, the efforts of exchanges like Binance, Bittrex, and Kraken have legitimized retail crypto trading platforms, and all are doing their best to attract institutional money as well. However, this involves offering more than access to tokens. Retail investors may have helped to inflate the 2017 bubble by investing in ICOs, but institutional investors want access to the kinds of funds, derivatives, and other financial instruments available on the traditional financial markets.
This spells great news for retail investors, as many of these avenues are also open to individuals as well.
As in traditional finance, funds can take on many forms, including hedge funds, index funds, and VC funds, to name a few. For institutions, Pantera Capital welcomes investors with over $100k to put into its hedge fund, while the Digital Asset Index Fund tracks the performance of a basket of cryptocurrencies, with a heavy focus on Bitcoin.
Individuals also have a choice of fund investment options. AMFEIX is an actively managed fund which groups investors’ funds into a pool which is then traded on liquid exchanges by experienced crypto traders. It publishes monthly reports on the fund performance, which show an impressive average monthly return of 23% to investors. The minimum investment amount is set at an affordable 0.02 BTC, and you can sign up pseudo-anonymously.
Crypto index funds have traditionally been available only to institutional investors, but this is starting to change. The Bit20 fund tracks a basket of 20 crypto assets but is only available on the BitShares platform. Iconomi offers the opportunity to invest or create your own array of digital assets, essentially creating your own crypto index fund.
There are various types of cryptocurrency derivatives available. Futures and swaps are two of the most common. The Chicago Mercantile Exchange was among the first to offer Bitcoin futures to institutions in December 2018, and the Intercontinental Exchange has recently announced it will start testing Bakkt, an institutional-grade platform for physically settled Bitcoin futures.
For individual investors, many exchanges now offer derivatives trading platforms including OKEx, Huobi, and soon, Binance. BitMEX, Cryptofacilities, and Deribit are all dedicated derivatives exchanges open to retail traders. Each platform has its own offering with various fees, margin, and underlying assets so you’ll need to do your research carefully.
Tokenizing physical assets is an exciting development in the fintech space but is still very much in its infancy. The options are potentially limitless – we’re seeing the opportunity to tokenize real estate, fine art, company stocks, precious metals, even racehorses or football clubs. Because it’s still in its earliest stages, much of the infrastructure such as regulated digital asset exchanges is still under development. However, in the institutional space, this is creating big waves.
For retail investors, options are opening up. Earlier this year, Estonia-based DX.Exchange launched its offering of tokenized stocks, allowing investors to buy stock tokens in companies like Tesla and Apple. If you prefer more of a safe-haven asset, then Digix offers the opportunity to invest in tokenized gold.
These developments illustrate that it’s time for crypto to start being painted in a new light. Rather than the image of Bitcoin being a volatile, illicit currency only used by technogeeks, crypto is entering a new era. With institutions now firmly in on the game, the Netflix filmmakers need to find a different story to tell.