Bitcoin (BTC) may soon see an influx of $500+ million in capital from Wall Street “whale” Guggenheim Partners, which has about $270 billion in AUM. The West Coast firm recently registered a new fund that might seek investment exposure to cryptocurrencies, according to a filing with the Securities and Exchange Commission.
This fund will be called Guggenheim Active Allocation Fund and will be listed under the ticker "GUG.” And this is not the first time Guggenheim has expressed interest in this new digital asset class. Back in November, the firm filed an amendment with the SEC to allow its $5 billion Macro Opportunities Fund to gain exposure to Bitcoin by investing up to 10% of the fund’s net asset value in the Grayscale Bitcoin Trust. Clearly, Guggenheim is comfortable with expanding its exposure in Bitcoin.
Scott Minerd, CIO of the firm, told CNN in an interview that based on Guggenheim’s fundamental research, he believes Bitcoin is now large enough to get institutional support and could eventually climb as high as $600,000. Minerd said the firm has been studying Bitcoin for almost 10 years, but it “just wasn’t big enough to justify institutional money.” Now with the total market cap of Bitcoin getting bigger, it started to look “very interesting” to Minerd. “If you consider the supply of Bitcoin relative … to the supply of gold in the world, and what the total value of gold is, if Bitcoin were to go to those kinds of numbers, you’d be talking about $400,000 to $600,000 per Bitcoin.”
A “Career Risk In Not Paying Attention To It”
As a clue of the rising interest from institutions, Grayscale Bitcoin Trust (a Bitcoin ETF) currently has about $24 billion in AUM. Believe it or not, Grayscale had just $2 billion in AUM last year and exploded to more than $20 billion by the end of the year. This growth represents a 900% increase.
Grayscale credited the massive growth to investments from institutional investors. CEO Michael Sonnenshein says, “There’s no longer professional risk of investing in the digital currency asset class — there’s probably more career risk in not paying attention to it.”
What’s more, financial advisors are feeling pressure from their clients to become experts on cryptocurrency. About 49% of advisors said clients have asked about cryptocurrencies in the past six months, up from 17% in 2020, according to the Financial Planning Association and the Journal of Financial Planning.
“Folks are realizing now that it’s not going away,” said Tyrone Ross, CEO of Onramp Invest, a provider of “cryptoasset” management technology for financial advisors.
Advisors who don’t stay up-to-date could risk getting left behind in the changing landscape. “Clients are coming to advisors now knowing more than the advisors,” Ross said. “The advisors are absolutely terrified because you never want to look dumb in front of your client.”
Other Institutions Are Also Looking To Gain Exposure To Bitcoin
Bank of New York Mellon announced its plans to issue, hold, and transfer clients' Bitcoin. Plus, the bank will soon allow digital currencies to be treated the same as more traditional investments in its asset-management system.
BlackRock: The $8 trillion asset manager has allowed two of its funds to invest in Bitcoin futures, according to its filings with the SEC.
Morgan Stanley becomes the first big U.S. bank to offer its wealth management clients access to Bitcoin funds. The bank, a big player in wealth management with $4 trillion in client assets, told its financial advisors that they will have access to three funds that allow ownership of Bitcoin.
The City Of Miami: Miami Mayor Francis Suarez proposed that Miami pay municipal workers and accept tax payments in Bitcoin. Plus, the city should invest its funds in cryptocurrency. Local officials have agreed to study the proposals.
The Upcoming SEC Decision Could Be The “Rocket Fuel”
To this date, the biggest constraint for institutions may be the lack of Bitcoin ETFs that make it easier for institutional clients to get exposure to Bitcoin. Institutions may feel uncomfortable opening wallets on Coinbase and transferring billions of dollars into them.
So, many experts believe that ETFs are the key to the future of institutional support for cryptocurrency. There is already a list of Bitcoin ETF applications from big institutions like Fidelity, WisdomTree, Wilshire Phoenix, VanEck, and First Trust SkyBridge.
However, the SEC is moving cautiously before approving these ETFs. Recently, it delayed its decision on WisdomTree’s ETF application from May 30 to July 14 "so that it has sufficient time to consider the proposed rule change and the comments received."
Gary Gensler, the SEC Chairman, is not a wide-eyed amateur of Bitcoin as he taught classes on blockchain technology at the Massachusetts Institute of Technology. Many experts believe that the SEC’s decision can be the next catalyst for Bitcoin’s price. Raoul Pal, CEO of Global Macro Investor, sees its decision as a potential “rocket fuel” for cryptocurrency. If the SEC’s decision is positive, “the whole crypto market will lift as prices go higher due to new sources of demand from RIAs and asset managers,” he said.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.