Grayscale, the firm behind the tradable Bitcoin Investment Trust (GBTC), has launched four new cryptocurrency-related investment funds.
The funds are named Bitcoin Cash Investment Trust, Ethereum Investment Trust, Litecoin Investment Trust, and XRP Investment Trust. They cover Bitcoin Cash, Ether, Litecoin and Ripple virtual currencies, respectively. (See also: Bitcoin Hedge Fund Created by 2 Former BlackRock Bond Specialists.)
The investment management company plans to launch more similar products later this year. Its four new crypto funds operate as trusts that follow a rule-based methodology.
Grayscale’s methodology keeps its primary focus on the liquidity of the cryptocurrencies. Each quarter, the digital currencies are evaluated to assess if they have declined to the 70 percent target of the overall market cap in digital currencies. This gives a good indication of their liquidity.
Required One-Year Holding Period
As the funds operate as trusts, only U.S.-based qualified accredited investors are allowed to invest in these funds. There is a one-year holding period before the investor can exit the funds without any restrictions.
Michael Sonnenshein, the managing director at Grayscale Investments, told CNBC, “Digital currencies are not like stocks and bonds. There's certain technological prowess that people need to have in order to handle them.”
Grayscale, which has $2.1 billion in assets under management across eight different products, created the popular Bitcoin Investment Trust (GBTC) in 2013. It provides a convenient medium to invest in and trade on the price movements of the popular bitcoin cryptocurrency, without the participant taking a direct position in the virtual currency. (For more, see 5 Ways to Short Bitcoin.)
The four new trusts add to the Digital Large Cap Fund, a multi-crypto investment fund, which was launched by the company last month. While Digital Large Cap Fund provides an investment medium for a combined basket of cryptocurrencies, the four trusts will focus on individual cryptocurrencies.
'Digital Currencies Are Here to Stay'
The launch of these new funds, and more to follow, will enable Grayscale to expand its customer base globally. For instance, Ripple is seeing great traction in the Asian markets like Japan and China, but the regulatory crackdown in a few regions have raised questions about the legality of investing in cryptocurrencies by the common investor. Accredited investors can now take the easy route to get exposure to various cryptocurrencies. (For more, see Is Bitcoin Banned in China?)
"It is our belief that digital currencies as an asset class has not only arrived, but are here to stay," Sonnenshein said. "Consequently, we are committed to providing investors with structures that enable them to participate in this exciting asset class." (For more, see Billionaire Marc Andreessen Backs Cryptocurrency-Focused Hedge Fund.)
Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no cryptocurrencies.
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