Bitcoin broke $7,000 again, giving fodder to the bulls to drive the market forward. Amidst the positive sentiment, Morgan Creek has rolled out a cryptocurrency fund for its investors. Morgan Yusko, the Chief Investment Officer of Morgan Creek Capital Management, is one such bull, and manages the fund for endowments, pension funds and family offices that want to invest in the digital currency market.
Morgan Creek Digital collaborated with Bitwise Asset Management to create the Digital Asset Index Fund, as another way to draw institutional investors into the cryptocurrency market. According to Yusko, the fund’s minimal investment will be $50,000. It will track a new index, the Morgan Creek Bitwise Digital Asset Index, or MCBDAI for short.
Investors will now be able to access an umbrella of digital assets, as the company goes head to head with Grayscale’s Digital Large Cap Fund, rolled out earlier in 2018. Grayscale advertises that investors are able to gain exposure “without the challenges of buying, storing, and safekeeping digital assets.”
The MCBDAI brings many of the same benefits to investors as the Grayscale fund. According to Yusko, not only will the fund enable investors to enter the market, but Bitcoin will reach $500,000 at some point in the future. If he is correct, then a price of just over $7,000 today is a bargain.
Part of the struggle between the bears and the bulls comes from the general newness of the market. Many investors have been on hold until larger companies begin to invest. Besides concerns over the volatility of the market, investors are also concerned with security. Index funds would arguably solve this problem, as investors are not holding actual crypto-assets. Instead, Morgan Creek would store any currencies in cold storage, reducing the risk of hackers gaining access to their private keys. In addition, third-party custody services will further reduce risk.
One signal to watch will be whether large endowments, such as Harvard and Stanford end up putting money into digital currencies and derivatives. If this happens, then we might expect another boost to the market.
Of note, the Morgan Creek fund does not include any pre-mined cryptocurrencies, such as Ripple and Stellar Lumens. This is a big hit to Ripple and Stellar, given that they are nurturing relationships with institutional investors who are likely also looking at the Morgan Creek fund.
Morgan Creek currently manages $1.5 billion in assets. This new fund includes exposure to Bitcoin, Ethereum, Bitcoin Cash, EOS, Litecoin, ZCash, Monero, Dash, Ethereum Classic and Omisego. The pre-mined cryptos were left out intentionally because central parties own over 30% of the supply, suggesting that such leverage would be too influential in creating an externality in price movement of the fund as a whole. According to Morgan Creek Digital partner, Anthony “Pomp” Pompliano, “Because we think that introduces a lot of additional risk that may not be there if it was a more decentralized network.”
The index is recalculated monthly, and requirements for the inclusion of other digital assets in the future include custody qualifications, trade concentration limits and a digital asset’s capability to be stored in cold storage.