High-net-worth investors can now hold bitcoin investments in their registered accounts, including registered retirement savings plans and tax-free savings accounts.
Starting this week, investment advisers are able to purchase the First Block Capital Bitcoin Trust, a fund that launched last year for accredited investors, on the NEO Connect – a trading platform developed by Aequitas Innovations Inc. and a sister platform to the NEO Exchange.
Under the symbol FBCBT, NEO Connect will allow investment advisers to purchase and redeem the open-ended bitcoin fund in the same way they buy and sell exchange-traded funds, and be able to allocate units into a self-directed registered account such as an RRSP or TFSA.
Developed by Vancouver-based First Block Capital Inc., the fund was first introduced as a private placement fund to accredited investors only, allowing investors to obtain exposure to bitcoin without having to acquire, store or manage underlying bitcoins. But the company hit a roadblock as advisers – who had to buy directly from First Block Capital – quickly voiced frustrations with the fund's extensive 30-day redemption window, says Sean Clark, co-founder and CEO of First Block Capital.
“The longer redemption time frame was a feature that we felt really hurt the fund and the reason why we didn’t reach hundreds of millions [in assets] coming out of the gate,” Mr. Clark said in an interview with The Globe and Mail. “Investors wanted more liquidity in this sector and we are pleased to now be able to offer advisers daily trading capabilities for those discretionary accounts.”
Bitcoin made headlines at the end of 2017 when the price of the crypto-asset hit a peak of $18,000. That has since dropped to just below $8,500 and took a further hit on Sept. 6, after Business Insider reported Goldman Sachs was no longer actively working on opening a trading desk for cryptocurrencies. Rather, the investment firm is turning its focus to a custody product, which will allow Goldman Sachs to hold cryptocurrencies on behalf of large clients and track its price.
"Goldman is still bullish on bitcoin; they are not walking away from it, but rather switching their focus," Mr. Clark says. "They understand the sequence of events that need to happen, and a custody solution needs to exist in order for this asset class to flourish. "
Currently, the FBCBT has approximately $20-million in assets under management, a significant drop from its peak of $40-million last year. Despite the drastic decline in the price of bitcoin, Mr. Clark remains optimistic in the direct bitcoin asset class and anticipates to see an increase in investor interest.
"The price of bitcoin is still going up, year over year," he adds. "The price spike in December was from a lot of speculation and the market getting ahead of itself. Now that it has settled down, now is the time to enter the market."
Jos Schmitt, president and CEO of NEO, says there is a growing appetite within the investment community for the efficient distribution of alternative assets.
"Investors of all types are asking for more diversification and access to less correlated investments, assets typically only accessible to large institutional investors," Mr. Schmitt says.
"With NEO Connect, we are democratizing that access with a goal to give everyone the ability to build a well-balanced investment portfolio."