The advent of digital currency bitcoin has changed the way we should think about risk and return says BitFunds managing director Jason Davis.

BitFunds is planning to launch the first listed investment fund focused on cryptocurrencies, XBT Investments, giving retail investors a regulated and familiar means to invest in what is an extremely volatile market.

Mr Davis says the recent downswing in crypto prices is all about context.

“People react to volatility but the most recent correction is, in comparison to previous, only of a small magnitude,” he told Stockhead.

Investors should look at bitcoin volatility within the context of its returns, Mr Davis says. A fall of 50 per cent is an extreme event for most assets. But most assets exhibit single or double digit per annum growth at best versus bitcoin’s hundreds or thousands or per cent.

The fintech enthusiast goes so far as to say that in a risk adjusted framework, bitcoin has so far been one of the best investments among all asset classes: “The extreme volatility has been more than compensated for by the exceptional overall positive returns.

“I’m not saying this will always be the case, I’m saying it has been the case so far. It might change tomorrow, or in five years — it’s impossible to know.”

$100 million Initial Public Offering

XBT Investments plans to raise $100 million in an Initial Public Offering and hopes to make investing in bitcoin as easy as buying a stock on the ASX.

At present, getting your hands on bitcoin in Australia means going directly to an exchange and establishing a bitcoin wallet, which you have complete responsibility for. Any loss or theft is not covered by a bank or central body.

Mr Davis told Stockhead investing in a structure like XBT takes away the custodial issue.

“It goes back to why banks exist in the first place. Bitcoin circumvents the system and puts the onus on the individual. While some are technological capable of storing it securely themselves, it does pose risks of cyber criminality,” he said.

“If someone gets your key they own your coins and it works the same as physical cash – it’s untraceable.”

BitFunds overarching philosophy is to be a passive investor, replicating the bitcoin price through the recently established futures market, in a way that is simple, familiar and regulated.

That doesn’t mean any volatility of bitcoin prices won’t affect the investment.

Over the weekend bitcoin continued to slump, trading at just over US$11,000 from highs of almost $20,000.

Chairman of UBS, the world’s largest wealth manager, Axel Weber announced last week that he did not advise his clients to invest directly in cryptocurrency due to their presumed ignorance of the product.

He said while the move was fine for institutional clients, individual investors needed to be protected – comparing it to the selling of complex financial products before the 2008 economic crash.


This special report is brought to you by BitFunds.

This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.

If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a Product Disclosure Statement (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.