VanEck Bitcoin Trust Fails to Capture Assets and Attention

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Almost six days after the launch of VanEck’s structured bitcoin investment product for institutions, it has only managed to raise $41,000 or four bitcoin, September 9, 2019. Bitcoin ETFs have been a focal point of the investment scenario around digital currency, so to see such a poor response from institutional investors is surprising. This stands to show that regulatory uncertainty has even the biggest institutions second-guessing exposure to bitcoin. 

Poor Start to Fund Raising

VanEck and SolidX launched a Bitcoin Trust, an investment product that is essentially an ETF, but doesn’t have the same governance structure. It is available only to institutions, so retail investors will have to sit on their hands at the moment.

Net assets after six days stand at $41,400 – a surprisingly low amount given the amount of ruckus the ETF decision has created.

A large part of this is apportioned to the fact that it’s an institutional product. Funds investing $100,000 or $10 million in bitcoin are not going to go down the less efficient road of ready made products. They will purchase it themselves and store it with one of the multiple custodial agencies for digital assets.

The ETF was meant to bring in more retail investment, just like Grayscale’s investment products. To add to this, the 2.9 percent expense fee is extraordinarily high for a passively managed fund.

Launching a structured product for institutions was not a strong idea, given that based on the amount of money they deploy in asset classes, it is an order of magnitude cheaper for funds to recreate these strategies themselves.

Focus on Retail, Still Inefficient

An investment product that should’ve been aimed at retailers has been launched for institutions, simply because launching something is better than nothing.

Retailers would be the ultimate beneficiaries of these schemes as it is simple to buy and insured by a centralized financial system.

However, those willing to make a small one time purchase of a hardware wallet and spend a few hours learning how to use it and setting it up can end up saving thousands, even millions of dollars in the long term.

ETFs recreate stock and bond indices and offer diversification across assets or industries. A bitcoin ETF simply buys into bitcoin.

This can be done by yourself with just a hardware wallet and no unnecessary management fees. Of course, you are your own custodian so there is the risk of losing funds if you don’t execute it correctly.

But it’s very easy to get it right if you put in a little bit of time and effort. In the long run, a bitcoin ETFs returns will always be lower than bitcoin returns. The only clear advantage of this is the ability to invest in them through an IRA and save money on capital gains tax, which is massive over the long term.

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