Koura's KiwiSaver offering allows investors to choose between nine different funds, one of which is a bitcoin-based fund. Bitcoin is the oldest and most established crypto currency based on blockchain technology.
Carlyon says the advent of ETFs makes it far easier to buy and sell crypto investments, which can now be bought on the New York Stock Exchange like any other approved security.
“All of a sudden, it just makes life much easier for everyone,” he says. “We now have a very easy way to buy and sell bitcoin without the risk of it being stollen or lost. We don't have to worry about custody.”
While the asset-class risk remains, over time the involvement of such large investment managers should reduce bitcoin's extreme volatility, he says.
Ahead of the Securities and Exchange Commission (SEC) granting approval to 11 firms to launch ETFs, the price of bitcoin surged as high as US$48,969.37 from its lows of about US$16,500 in early 2023 but it has since eased a little to about US$42,633.
Back in July 2021, bitcoin reached a record near US$69,000.
The SEC chair Gary Gensler made it clear that the regulator wasn't very happy about having to allow bitcoin ETFs, saying a DC Circuit Court of Appeals decision last October had forced its hand.
That court ruled that SEC's refusal to allow Grayscale Investments, a digital currency asset management company, to convert its about US$17 billion Grayscale Bitcoin Trust into an ETF was “arbitrary and capricious."
The SEC voted three-to-two to grant approval and Gensler said that “we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whos value is tied to crypto.”
One of SEC's dissenters, Caroline Crenshaw, said that she was “deeply concerned that these products will flood the markets and land squarely in the retirement accounts of US households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets.”
Carlyon says permiting major investment managers to enter the market will do much to help eliminate such fraud and manipulation.
The prosecutions of two of the industry's largest proponents, FTX founder Sam Bankman-Fried and Binance's Changpeng Zhao have also gone some way towards cleaning up the industry.
Koura currently recommends its customers allot 3% of their portfolios to the bitcoin fund and won't allow them to invest more than 10%.
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