An oft-heard phrase in crypto conversations is something along the lines of “when bitcoin matures–.” The current market is too young and inchoate to draw any definitive conclusions about, we're told, and we should pay special attention to the level-headed grown-ups who will replace all that fanciful revolution talk with calm assurances of compliance and real-world application. The latter group often hail from legacy financial institutions, where they honed their sales-speak and internalized the demands of today's prudent investor: low fees, uncorrelated returns, risk-adjusted performance, not having your money at constant risk of being stolen by hackers, etc.
In the latest example of Cryptostan growing up, meet Crescent Crypto Asset Management, an index fund provider for the blockchain space, which will charge a trifling 1 percent management fee plus 10 percent of profits earned to those investors sensible enough to realize that the only smarter than putting your entire life savings into bitcoin is spreading those assets into 20 different coins:
According to Ali Hassan, one of three co-founders, the aim is to do for cryptocurrencies what SPY, the popular exchange-traded fund tracking the S&P 500, did for US equities. He is aiming for $50m at launch, perhaps rising to a cap of $500m in 2019. “This is as close to an ETF as one could get in the crypto space,” said Mr Hassan, 26. “We’ve built out a product that mirrors the market to a high degree of correlation, without having to buy every currency in the market.”
Here's what their portfolio looks like – not just the old guard of bitcoin and ethereum, but venerable names like Neo, Qtum, and Stratis:
Crescent Crypto's marketing angle is all about gently assuring those who find their arousal at the thought of plunging into cryptocurrencies confusing and kind of scary. As we've been told before, these things aren't some scammy hyped-up gewgaw in the midst of a delirious speculative epidemic, but basically a shiny metal that you dig up, except on the internet:
This is simply an asset akin to gold, he said, noting that the metal has been seen as valuable over centuries because “we assume it has some sort of value”. “That’s what’s happening with bitcoin. It has very little utility value, it is expensive to transact in, and it’s not as fast as it used to be. But it’s becoming de facto digital gold.”
Glad we've got that cleared up. The final question the still-skeptical (accredited) investor may be asking is how they actually make it work. It turns out that actually owning crypto coins is kind of hard. You have to keep a lengthy private key somewhere safe and offline that grants access to your stash. If you outsource that to someone else – say, an index provider – they have to do so in a way that's scalable and efficient, or else risk losing everyone's money in a big terrible hack. So if you're wondering how a supposed “index fund” could possibly justify taking a positively hedge fund-like 10 percent of profits, it's this:
[The Mt. Gox hack] prompted the trio to invest in so-called “cold wallet” facilities at an undisclosed location in New Jersey. By holding coins offline, protected by random codes known as mnemonic seeds, Crescent claims it can minimise the risk of theft.
So this is what it looks like when bitcoin matures: twenty-something ex-Goldmanites renting out a Jersey basement to store millions of alphanumeric passwords for accredited investors who are willing to pay thousands of times what an ordinary index fund costs to get exposure to cryptos without going to any of the trouble of actually doing it themselves.