Rock bottom digital currency markets have not yet deterred everyone from investing in the embryonic industry. This week, a US pension house became the first from the sector to take the plunge and invest into a crypto-based venture capital fund.
According to Bloomberg, two pension plans, both managed by Fairfax County Retirement Systems from Virginia, are anchor investors in a new $40 million Morgan Creek Digital venture-capital fund. Fairfax’s Chief Investment Officer, Katherine Molnar, told Bloomberg that the fund sees Bitcoin as an “emerging opportunity” that offers an “attractive asymmetric return profile.”
Up until recently, institutional investors have been deterred from looking at the crypto space due to market volatility and regulatory issues. The US government has also not issued clear regulatory approval of crypto investing and this has prevented a number of major funds, including highly-anticipated launches by Fidelity and the Intercontinental Exchange, formalizing their digital asset investment plans.
Morgan Creek Digital founder Anthony Pompliano says the fund is structured like a traditional venture capital fund and will be investing in the equity of companies from the blockchain and crypto assets industry while also holding a small percentage in liquid crypto assets including Bitcoin. Pompliano, who says that other fund investors include an insurance company, a university endowment and a private foundation, remains confident that increasing numbers of institutional investors will soon be very attracted to the space.
“The smart money is not distracted by price,” said Pompliano, “but looks at the long-term trends, and believes they’re betting on innovation as a great way to deliver risk-mitigated returns.”
This is a sentiment shared by Galaxy Digital chief, Mike Novogratz, who yesterday told Bloomberg TV that Bitcoin is going to be a store of value akin to “digital gold”. Novogratz argues that Bitcoin will be increasingly treated the same as a “sovereign currency” which is why he is confident that major institutions will be entering the digital asset market this year. Novogratz says they will start by investing relatively small amounts in crypto funds.
Digital currency markets are currently down over 85% from their peaks at the beginning of last year. However, on the evidence of the Morgan Creek Digital deal, institutional interest seems to be increasing as is, reportedly, the market activity of the so-called “whales” who hold more than 80% of all Bitcoin in circulation. More mainstream products and crypto-related funds will be launched this year and this might – there always has to be a caveat with crypto – trigger a significant market turnaround for the digital asset sector.